Cabinet discusses fuel prices, but no immediate relief

The Union Cabinet discussed the issue of sky-rocketing prices of petrol and diesel and said that a plan is being worked to control the frequent fuel price volatility but stopped short of giving an immediate relief to consumers.

Briefing reporters after the Cabinet meeting, Law and IT Minister Ravi Shankar Prasad said that the government is planning to take a long-term view on how to give relief to customers.

“The government is keen that instead of having an ad hoc measure, it may be desirable to have a long-term view which addresses not only the volatility but also takes care of the unnecessary ambiguity arising out of frequent ups and downs. That process is underway," he said.

Sources in the finance ministry said a Re 1 cut in petrol prices drains the exchequer by an estimated Rs 13,000 crore and the government is wary of letting its finances slip out of hand.

However, the door is still open to cut excise duty provided that states too cut VAT on the two fuels, they said, adding cutting excise duty alone may not give a long-term support to consumers.

The oil marketing companies, who are often asked to bear the burden in these times, suggested the government bring petroleum products under the Goods and Services Tax (GST) to give a long-lasting relief to consumers.

However, states, which earn a large chunk of revenues through VAT on petrol and diesel, have never agreed to bring these commodities under GST.