Gujarat and Maharashtra on Tuesday became the first two states to agree to the Centre’s directive to lower the Value Added Tax on petrol and diesel, PTI reported. While the VAT on the fuels in Gujarat will be lower by 4% from midnight, Maharashtra has cut the price on petrol and diesel by Rs 2 and Re 1 per litre.

With this rate cut, the price of petrol will drop by Rs 2.93 to 66.53 per litre and that of diesel by Rs 2.72 to Rs 60.77 a litre in Gujarat, Chief Minister Vijay Rupani said.

Although the state government is expected to lose around Rs 2,316 crore annually because of this, “we made this decision in the interest of people”, Rupani said.

Assembly elections will be held in Gujarat later this year.

The announcements by the two states come days after the Centre had asked all state governments to cut the Value Added Tax – an additional state levy – on fuel by 5%. “We urge states to take responsibility, just like the Centre did, in the direction of consumer interest,” Minister for Petroleum and Natural Gas Dharmendra Pradhan had said.

Since states were the ultimate beneficiaries of taxes on petrol and diesel, they should share the responsibility of providing relief to consumers, he had said on October 4.

A day earlier, the Centre had decided to reduce excise duty on petrol and diesel by Rs 2. The decision is expected to help cushion the impact of rising crude oil prices on retail petrol and diesel prices, a government release had said. The government, however, expects an extra revenue loss of Rs 13,000 crore in the remaining financial year because of the reduction.