What made Modi government slash excise duty on petrol, diesel by Rs 2 per litre?

Central government slashed basic excise duty on petrol and diesel by Rs 2 per litre on Tuesday midnight exactly after a fortnight when Finance Minister Arun Jaitley had ruled out the possibility.

The Finance Minister while responding to question from reporters at weekly cabinet meeting held in September on whether the government would consider cutting excise duty said, “You should remember that the government needs revenue to run. How will you build highways?,” he said. “The government has increased public spending on infrastructure… Whatever (GDP) growth is there, it is fueled by public spending and FDI. If public spending is slashed, it will mean cutting down expenditure on social sector scheme”, reported Indian Express on September 20.

A week before that Petroleum Minister Dharmendra Pradhan said that “government cannot change fuel prices on a knee-jerk basis” and pitched GST as the “only way to have a rational price mechanism for petroleum products”.

Petrol prices in Delhi have been hovering around and above Rs 70 per litre, the highest in three years and diesel have been around Rs 59 per litre for the last few weeks.

As much as Rs 21.48 per litre in price of petrol in Delhi is due to excise duty and another Rs 14.99 is due to VAT. Excise duty on diesel has been Rs 17.33 per litre in delhi.

The Opposition attacked the Centre for failing to keep the prices of petrol and diesel in check despite a fall in global crude prices.

Earlier, Arvind Kejriwal-led Aam Aadmi Party in a memorandum to Petroleum Minister Dharmendra Pradhan said, “The fact is that oil companies are making unethical windfall profits at the cost of the common man since your government took over at the Centre.”

BJP ally in Maharashtra Shiv Sena attacked ruling BJP government for high prices of petrol and diesel and said, “Have they forgotten, how–when there was a fuel hike during UPA, all top BJP leaders like Rajnath Singh, Sushma Swaraj, Smriti Irani and Dharmendra Pradhan–jammed the streets protesting with empty gas cylinders”.

On Tuesday night, the Central Board for Excise and Customs said that the excise duty on petrol and diesel was reduced to “cushion the impact of rising international prices of crude petroleum oil, petrol and diesel on their retail sale prices”. The duty cut on fuel prices came on a day when diesel prices in Delhi were at an all-time high of Rs 59.14.

Did the government give in to the pressure from the Opposition or is it crucial Gujarat assembly elections ahead which led the government to cut the excise duty on petrol and diesel?