Indian Government Reduces Taxes on Fuel and Essential Goods to Combat Inflation, Reports Reuters

By Munsif Vengattil

NEW DELHI – India announced significant changes to its tax structure on essential commodities on Saturday, aiming to protect consumers from the impacts of rising prices amid ongoing inflation.

Finance Minister Nirmala Sitharaman revealed a reduction in excise duty on petrol by 8 rupees per litre and 6 rupees per litre on diesel. The new tax changes for these fuels are expected to lead to a potential revenue loss of around 1 trillion Indian rupees annually for the government, according to her statements on social media.

Additionally, the government has eliminated the import duty on anthracite, PCI coal, and coking coal to help reduce the costs of raw materials for local markets. These measures will take effect from May 22.

Sitharaman also urged state governments to implement similar reductions in fuel prices to align with federal initiatives. Currently, petrol prices in New Delhi stand at 105.41 rupees per litre, while diesel is priced at 96.67 rupees.

The government plans to introduce a new subsidy of 200 rupees per cooking gas cylinder for over 90 million beneficiaries as part of a welfare program aimed at supporting women living below the poverty line. This subsidy is anticipated to have an annual fiscal impact of approximately 61 billion Indian rupees.

"Prime Minister Narendra Modi has instructed all government branches to act with sensitivity and provide relief to the common man," Sitharaman stated.

The administration is also looking into reducing taxes on raw materials used for plastic production to lower the costs of final products. Experts warn that these recent decisions may raise fiscal concerns and lead to questions about the government’s ability to meet its deficit target of 6.4% of GDP for the fiscal year 2022-23.

Inflation has emerged as a critical issue for Modi’s government, especially with upcoming elections for several state assemblies. A significant rise in inflation has resulted in increased input costs for businesses, prompting the central bank to raise interest rates unexpectedly earlier this month.

"Today’s decisions, particularly the notable decrease in petrol and diesel prices, will have a positive effect on various sectors and offer relief to our citizens," Modi stated on social media. "Our priority is always our people!"