Fuel price skyrockets: At least 19 states can cut tax on petrol by Rs 3.2 per litre — but will they?

By: | Updated: September 13, 2018 7:12 PM

Fuel price skyrockets: At least 19 states can cut the tax on petrol prices by about Rs 3.2 per litre to give cushion to people of the country -- but the question is will they.

Fuel price skyrockets: At least 19 states can cut tax on petrol by Rs 3.2 per litre -- but will they?Fuel price skyrockets: At least 19 states can cut tax on petrol by Rs 3.2 per litre — but will they? (Image: Reuters)

At least 19 states can cut the tax on petrol prices by about Rs 3.2 per litre to give cushion to people of the country — but the question is will they. Notably, as the Congress hit streets through Bharat Bandh against the skyrocketing fuel prices, three states announced some relief but many are yet to follow suit.

Poll-bound Rajasthan announced a cut of 4% on Value Added Tax (VAT), followed by a reduction of Re 1 per litre by West Bengal and Rs 2 a litre by Andhra Pradesh on both petrol and diesel.

In India, taxes are levied on petrol and diesel by both central government and state governments. The central government levies fixed rates of Rs 19.43 a litre on petrol prices and Rs 15.33  a litre on diesel prices. Meanwhile, state taxes are ad valorem, which means that with the increase in crude oil prices, the proportion of taxes also increases.

As per the calculation done by SBI Research, states stand to get a windfall gain of Rs 22,000 crore due to increase crude oil prices. By looking into the $1/barrel increase in oil prices, this translates Rs 1,513 crore to all the major 19 states. The largest gain would be in Maharashtra (Rs 3,389 crore) followed by Gujarat (Rs 2,842 crore), the SBI research said.

This gives room to states to cut petrol prices by Rs 3.2 per litre and diesel by Rs 2.30 per litre, without affecting their revenue arithmetic, the SBI research noted. However, states might not be providing relief against hike fuel prices “only to manage their unforeseen expenditure like farm loan waiver in Uttar Pradesh, Maharashtra, Karnataka, etc, SBI Research said.

Fuel prices on Thursday hit a new all-time high, with petrol prices nearing Rs 90-mark in Mumbai. The petrol and diesel prices were increased by 13 paise and 11 paise respectively. Petrol prices had on Tuesday breached the psychological barrier of Rs 90 and touched a scorching Rs 90.11 in Maharashtra’s Parbhani.

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