Grappling with low revenues following the outbreak of Covid-19 and the subsequent lockdown, the Uttar Pradesh government on Wednesday hiked the value added tax (VAT) on petrol and diesel and increased the excise duty on liquor to help generate an additional revenue of Rs 4,500 crore annually.

Briefing newspersons after a Cabinet meeting, finance minister Suresh Khanna said the retail price of petrol has been raised by Rs 2 per litre and diesel by Re 1 per litre. “As a result, petrol will now cost Rs 73.91 a litre, while diesel prices will stand at Rs 63.86 per litre. New prices will be applicable from today midnight,” he said, adding that the government has taken care not to increase diesel prices beyond Re 1 per litre since it is commonly used in the farm, transport and industrial sectors.

Based on last year’s total consumption of petrol and diesel in UP, which stood at 470 crore litre and 1,130 crore litre, respectively, the government expects to generate an additional revenue of Rs 2,070 crore annually through VAT on auto fuel.

Since petrol and diesel do not fall under the purview of the GST, we have increased the prices to shore up the state’s dwindling revenues,” he said.

The Uttar Pradesh government’s move follows the Centre’s decision on Tuesday to increase the excise duty on petrol by Rs 10 per litre and Rs 13 per litre for diesel.

Khanna said the government has increased prices of all categories of liquor. “While country-made liquor has been hiked by Rs 5, prices of foreign liquor have been raised by between Rs 10 and Rs 50 for bottles ranging from 180 ml to 500 ml and above. Prices of imported liquor have been increased by Rs 100 for 180 ml, Rs 200 for 180-500 ml and Rs 400 for more than 500 ml,” he said. The government hopes to generate additional Rs 2,350 crore by raising prices of liquor.

Explaining the need for increasing prices, Khanna said against the tax demand of Rs 12,141 crore in April 2020, mop-up stood at merely Rs 1,178 crore. “This has made the overall financial situation tight for the state,” he said, adding that the government was forced to explore additional sources of revenue.