He also asked state governments to follow suit by cutting a sales tax or VAT by a similar amount.
Following this, the Gujarat and Maharashtra Governments announced additional relief of Rs2.5/litre Petrol/Diesel.
For almost a month, union ministers had insisted there would be no cut in prices of petrol and diesel, but the Narendra Modi government on Thursday succumbed to the pressure built not just by the farmer protest, but to voices within the Bharatiya Janata Party (BJP). He added that the last time that the Centre asked states to provide relief to the common man "only BJP or NDA allies-led states" did that.
"By asking the oil marketing companies to absorb the price hike, the government is giving a signal that it can interfere at anytime in a deregulated market in the larger public interest", said Gagan Dixit, a senior analyst with Elara Capital.
"The government's move is positive as it will placate prices and inflation, said rating agency Care".
Toddler shreds more than $1,000 in cash
But as they say, it's better late than never! They looked all over their house, even in the trash. "We have a lot of Leo moments". The mom said Leo enjoyed helping her shred the bills, but they usually turned it off after they use it.
The price cuts would be effective from midnight tonight.
However, the Congress hit out at the Modi government over what it described as a "meagre" reduction in excise duty on petrol and diesel, saying it is like applying a band-aid after inflicting a thousand wounds on the people of the country. HPCL shares fell 14.7% to Rs 214.40, BPCL was down 17.08% at Rs 313 and Indian Oil dived 14.23% to Rs 134.95. Party spokesperson Sambit Patra expressed hope that people would get the Rs-5-per-litre relief at the earliest, PTI reported.
Brent, the benchmark for more than half the world's oil, has touched Dollars 86 per barrel mark, the highest in four years.
"I hope all state governments do this, and they announce this so that consumers benefit by 5 rupees", Jaitley told reporters.
The Chandigarh administration has reduced the value added tax (VAT) on petrol and diesel, an official release said in Chandigarh. "Thus petrol & diesel wd be Rs. 5 cheaper in the State of Gujarat". It stands at Rs 15.33 per litre now. "So the impact will be Rs 10,500 crore in current fiscal which is only 0.05 per cent of fiscal deficit".
The Congress claimed the government has made a revenue Rs 13 lakh crore in the past four years from petroleum products alone.