Sensex Falls for Third Straight Day as Fuel Price Cut Spooks Investors

Andrew Cummings
October 6, 2018

He also asked state governments to follow suit by cutting a sales tax or VAT by a similar amount.

Indian stocks fell for a third straight session on Friday, dragged by shares of energy companies such as Reliance Industries Ltd and oil marketers, a day after the government announced a cut in fuel prices.

While the recent tax cut by the government resulting in the lower fuel price is great news for consumers, global oil prices are still a big determinant on how petrol and diesel are ultimately priced in India.

"The states' revenue increases because of increased crude oil prices and hence it is easier for the states to absorb Rs 2.50", he said. On Thursday, October 4, the price of petrol hit the Rs 84 per litre mark in Delhi while diesel cost went Rs 80 per litre in Mumbai. "The reduction is too late and too little... the Centre should have reduced excise duty further and should have asked oil marketing companies to absorb more".

BJP chief Amit Shah said the decision showed the government's sensitivity towards welfare. The Centre has cut excise duties only twice in the past 22 months - once in October previous year when it cut the duty by Rs 2 a litre and now by Rs 1.50.

The RBI said that the state-owned oil companies can raise external commercial borrowings (ECBs) for working capital with minimum average maturity of 3-5 years and they don't have to mandatorily hedge all ECBs. The Vasundhara Raje-led Rajasthan government had cut fuel prices by Rs 2.5 on the eve of the "Bharat bandh" called by the Congress and other Opposition parties on September 10.

Thank you Hon PM @narendramodi ji and Union Minister @arunjaitley ji for reducing ₹2.50/litre on both Diesel and Petrol. Brent crossed $86 per barrel and this is the highest in the last four years. A 13 percent depreciation in the Indian rupee had only made fuel imports costlier.

Finance Minister Arun Jaitley urged states to match the cut with an equivalent reduction in the value-added tax.

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