"The new price will be enforced with immediate effect," Chief Secretary G C Pati told reporters after the Cabinet meeting.
Petrol, which used to cost Rs 61.64 per litre, would now cost Rs 63.13 a litre. Similarly, the price of one litre of diesel would be Rs 55.66 as against the earlier Rs 54.33.
With this decrease in rates, within a span of just over five months, the retail price of petrol has been reduced by Rs 12.39 per litre.
While, within a span of three-and-a-half months, the retail price of diesel has been reduced by 9.17 per litre.
Justifying the government's decision on raising the VAT on the petrol and diesel, Pati said that due to reduction of prices, there will be a loss of around Rs 200 crore to the state exchequer in the last four months of 2014-15 fiscal.
Pati said in view of continuous fall in the prices of crude, the central government increased the excise duty by Rs 1.50 per litre on petrol and diesel with effect in November and further hiked it by Rs 2.25 per litre on petrol and Rs 1 per litre of diesel this month to recoup losses in revenue.
Replying to a question, Pati said by the proposed tax rationalisation, the state will generate an additional revenue to the tune of Rs 360 crore per annum and Rs 90 crore during the remaining period of the current fiscal.
In another decision, the Cabinet also approved a proposal to streamline tax administration by modification of the Odisha VAT Act, 2004. "The cabinet approved a proposal to increase threshold limit for tax payment from Rs 1 lakh to Rs 10 lakh in case of manufacturers and from Rs 5 lakh to Rs 10 lakh in case of general traders," Pati said.

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