States reap millions from petrol

States reap millions from petrol

Almost a month after the steep hike in fuel prices on June 25, economically better-off states like Karnataka, Maharashtra, Gujarat, Andhra Pradesh and Tamil Nadu have just not found it necessary to soften the fuel price hike burden on the common man. Only Delhi and Goa have acted on the advice. 

And while consumers bear the burden of the high fuel prices, state governments will see their coffers swell because of additional accruals on account of these hikes. That would be a bonus as economic recovery has stirred revenue bouncy.

The ruling BJP in Karnataka, which was at the forefront of a countrywide strike earlier this month to protest the Centre’s decision to hike the prices of petroleum products, has done little to bring cheer to the people who are paying high prices for the mass-consumed petrol, diesel and LPG. The tax rates in the state are one of the highest in the country.

According to data complied by the Petroleum Ministry’s Economic Intelligence Wing, the state exchequer is estimated to earn additional revenue of Rs 298 crore in a full year due to the last month’s petrol and diesel price hikes––Rs 174.48 crore from diesel and Rs 124.43 from petrol per year.

The State levies high local taxes of nearly 30 per cent (25 per cent VAT and 5 per cent entry tax) on petrol and 23 per cent (18 per cent VAT and 5 per cent entry tax) on diesel.

The State will additionally collect 91 paisa per litre of petrol and 39 paisa per litre of diesel simply because the taxes are levied on the value of the fuel and not on volume (see table).

According to data collected by Deccan Herald, Gujarat, another BJP-run state, will pocket Rs 284.46 crore annually because of upward the revision in auto fuel prices. Gujarat imposes VAT at the rate of 23 per cent, plus a 2 per cent cess on petrol and 24 per cent (21 per cent VAT and 3 per cent cess) on diesel.

Andhra Pradesh, a Congress-run state, too has ignored the plea. The state, which levies local taxes as high as 33 per cent and 22.25 per cent on petrol and diesel, respectively, stands to rake in additional revenue of Rs 411 crore per year due to the recent upward revision in auto fuel price, according to EIW data.

Another neighbouring state, the DMK-ruled Tamil Nadu, is estimated to pockets Rs 393 cr as it levies VAT to the tune of 30 per cent and 21.43 per cent on petrol and diesel, respectively. Among all states, Maharashtra, currently ruled by a Congress-NCP coalition, is estimated to gain the highest: Rs 548 cr by way of additional revenue. It imposes VAT at the rate of 25 per cent and Re 1 per litre on petrol and 23 per cent on diesel. The EIW data reveals that all states together are estimated to earn additional revenue of Rs 4,000 cr through their existing tax rates.

Only two states, Delhi and Goa, both ruled by the Congress, have volunteered to reduce the VAT on diesel after the Centre on June 25 decided to decontrol petrol pricing. Last week the Delhi government slashed the VAT on diesel from 20 per cent to 12.5 per cent, bringing down its retail price by Rs 2.70 per litre.

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