The Hindu Business Line : Deora tells States to reduce sales tax on petrol, diesel

New Delhi, July 2 To help cushion the impact of the auto fuel price hike announced by the Government on Wednesday, the Petroleum Minister, Mr Murli Deora, has appealed to the State Governments to lower the sales tax on these products.

Informing the Lok Sabha, the Minister said, “We will keep the views expressed by members in mind and we will respond suitably in case there is a decline in international prices of crude oil. At the same time, I would appeal to State Governments to do their bit by revising downwards the sales tax imposed on Petrol and Diesel.”

The retail price of petrol has been raised by Rs 4 a litre and diesel by Rs 2 a litre. Sales tax varies from State to State and is currently as high as 33 per cent on petrol in Andhra Pradesh, followed by Tamil Nadu 30 per cent, 29.30 per cent in Kerala, 28.75 per cent in Madhya Pradesh, and 27.98 per cent in West Bengal. On diesel, sales tax is as high as 26 per cent in Maharasthra, followed by Chattisgarh 25 per cent, Kerala 24.94 per cent and Gujarat 24.63 per cent.

Rationale for price hike

Explaining the reason for the hike, he said, “Any delay in price revision would have jeopardised OMCs’ liquidity position, with attendant consequences for smooth supply and distribution of essential fuels across the country.”

“When the price of the Indian basket of crude oil fell from its highest level of $142/bbl in June, 2008 to $ 40 per barrel in December 2008, Government had responded by reducing the price of petrol by Rs 10 a litre and the price of diesel by Rs 4 a litre, in two stages within a space of two months.

Thereafter, the international price of crude oil has risen from $ 40 per barrel in December 2008 to around $ 70 per barrel today,” he informed.

“This increase in crude oil prices by about 75 per cent since December, without corresponding increase in retail selling prices of sensitive petroleum products, had resulted in OMCs’ under-recoveries going up.

The OMCs’ under-recoveries were projected to be Rs 70,200 crore, at an average Indian basket crude price of $70/barrel, during 2009-10,” the Minister said.