Rupee plunge, crude oil spike to give states Rs 22,700 crore windfall

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Andhra Pradesh Chief Minister N Chandrababu Naidu on Monday announced a reduction in petrol and diesel price by Rs 2 each, in the state.

Despite his criticism against the NDA, he didn't support the bandh and neither did the major Opposition party, YSR Congress party, in the state.

The Rajasthan government on Sunday announced a 4 per cent Value-Added Tax deduction in the petrol and diesel prices which, the official statement said, came into effect from midnight.

In Mumbai, the price of petrol is Rs 88.26 while the price of diesel is Rs 77.47.

Although the state-run oil companies did not raise prices today, petrol and diesel continue to be at all-time record highs.

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The petition has also alleged that the government was spreading "misleading information" by connecting the rising fuel prices here with the global increase in the rate of crude oil as the cost of petrol and diesel did not go down when crude was cheaper.

The incessant increase in fuel prices may have given the Opposition a convenient tool to beat the government with.

Nearly half of the retail selling price of the two fuels is made up of central and state taxes. "This increase in petrol and diesel prices is likely to give the states a windfall gain of around Rs 227 billion over and above the budget estimates for current financial year", SBI Research said. In Mumbai and Thane, the Maharashtra government charges a VAT/sales tax at 39.12 per cent on petrol, and 24.78 per cent on diesel.

AP is the second state to do so in recent times after Rajasthan. The VAT is now reduced to 26 percent from 30 percent which would be close to a Rs 2.5/litre drop from Sunday's prices.

Observing that there were larger economic issues involved when it comes to fuel prices, the Delhi High Court on Wednesday said it can not ask the government to fix the price but directed it to decide the representation of a Delhi-based designer who has filed a PIL seeking direction to the government to fix fair price of petrol and diesel in accordance with the Essential Commodities Act.

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