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Indian government trims tax on fuel, essential commodities to fight inflation

Commodities May 21, 2022 01:30PM ET
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© Reuters. FILE PHOTO: A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018. REUTERS/Francis Mascarenhas

By Munsif Vengattil

NEW DELHI (Reuters) - India on Saturday announced a series of changes to the tax structure levied on crucial commodities in a bid to insulate consumers from rising prices amid high inflation.

Finance Minister Nirmala Sitharaman announced a cut in excise duty on petrol by 8 rupees ($0.1028) per litre, and 6 rupees per litre on diesel.

The new tax regime on petrol and diesel could result in a loss of about 1 trillion Indian rupees to the government in annual revenue due to the lower collection, she said in a series of tweets.

The government also removed the import duty on anthracite, PCI coal and coking coal in a bid to reduce raw material costs for local market demand.

The latest measures will be effective from May 22, the government said in a notification after the announcement by Sitharaman, who also urged state governments to follow suit with similar reductions on fuel prices keeping in line with federal plans.

A litre of petrol currently costs 105.41 rupees, while diesel is at 96.67 rupees in New Delhi.

The government will also provide a fresh subsidy of 200 rupees per cooking gas cylinder to over 90 million beneficiaries under a welfare scheme introduced for women below the poverty line.

The subsidy will have an annual revenue implication of nearly 61 billion Indian rupees, Sitharaman said.

"Prime Minister Narendra Modi has specifically asked all arms of the government to work with sensitivity and give relief to the common man," she said.

The government was also working to reduce taxes on raw materials for plastic products to lower down the cost of final products.

Experts said the latest moves will likely increase fiscal concerns and raise doubts about government meeting its deficit target of 6.4% of GDP for 2022-23.

But inflation has become a major headache for Modi's government ahead of elections to several Indian state assemblies this year.

A sharp jump in inflation meant input costs escalated for businesses.

The rise prompted the central bank to hike interest rates at an unscheduled policy meeting this month.

"Today's decisions, especially the one relating to a significant drop in petrol and diesel prices, will positively impact various sectors, provide relief to our citizens," Modi wrote on Twitter (NYSE:TWTR). "It is always people first for us!"

($1 = 77.8500 Indian rupees)

Indian government trims tax on fuel, essential commodities to fight inflation
 

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Comments (9)
Vivek Purav
Vivek Purav May 21, 2022 2:58PM ET
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Crude prices are going north. Govt have to balance their tax accordingly. and also have to manage inflation. Govt I doing balance act.
Dweeptaru Das
Dweeptaru Das May 21, 2022 2:58PM ET
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so when u are preaching the centre about what and what not to do, why don't u join politics the
Narmada Furniture
Narmada Furniture May 21, 2022 12:38PM ET
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Omcs will raise prices with same amount coming week🤣
Yagnik Patel
Yagnik Patel May 21, 2022 12:26PM ET
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India import 92% Fuel how you can dare to decrease prices? any election near about? and reason " decrease fir poor people" whom used only 1% of fuell.
Yagnik Patel
Yagnik Patel May 21, 2022 12:26PM ET
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India import 92% Fuel how you can dare to decrease prices? any election near about? and reason " decrease fir poor people" whom used only 1% of feul.
Yagnik Patel
Yagnik Patel May 21, 2022 12:23PM ET
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one more reason to break market. GDP decreased. do more charity..
FMGK Blue
FMGK Blue May 21, 2022 11:08AM ET
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Smart... Why US not doing the same?
Rambabu Dasari
Rambabu Dasari May 21, 2022 11:02AM ET
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seems it positive news to market
Rambabu Dasari
Rambabu Dasari May 21, 2022 11:02AM ET
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seems it positive news to market
sandeep varma
sandeep varma May 21, 2022 10:56AM ET
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Will Market fly or crash..
bsun sun
bsun sun May 21, 2022 10:56AM ET
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market will fly
 
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