The Finance Minister said the excise duty cut would have an impact of Rs 10,500 crore on central government's tax revenues.
He also said he would write to all the states to cut their respective taxes. In Chandigarh, the total benefit to consumers will be of Rs 3.90 per litre in petrol.
While it may seem the Indian government certainly has room for slashing taxes further on fuels, the recent cut is estimated to cost the government ₹2.7 trillion.
BJP chief Amit Shah was closeted with three senior ministers on Wednesday and discussed the need for cutting fuel prices, sources said.
Addressing the 16th Hindustan Times Leadership Summit here, the finance minister said the depreciation in the rupee and the high current account deficit were transient factors that had indeed affected India, but these had fallen short of impacting capital flows of long-term nature - foreign direct investment (FDI).
On Thursday, the price of petrol was raised by 15 paise a litre while that of diesel was hiked by 11 paise a litre.
The move was seen as a reversal of a 2014 decision to scrap regulated fuel prices - a regime that was blamed for deterring state oil marketing firms from expanding and for choking off investment in domestic oil fields by India's biggest oil producer.
Bihar government also reduced petrol and diesel prices by Rs 2.52 and Rs 2.55 per litre respectively on Friday.
Meanwhile, the Maharashtra government slashed the diesel prices by Rs 1.56 per litre, taking the effective relief on the transportation fuel to Rs 4.06.
States Respond; Price Reduced By Rs 5!
However, the Federation of All Maharashtra Petrol Dealers Association (FAMPEDA), Chairman, Uday Lodh, while welcoming the reductions, pointed out that the daily price increase by the Oil Marketing Companies will continue as per the global crude oil price fluctuations. OMCs are fully competent to deal with the situation their financial position today is much stronger compared to what has been in the past where they had to charge much lesser.