Petrol price further cut by Rs 8, diesel by Rs 9 in BJP-ruled states

Petrol price has been further reduced by as much as Rs 8.7 per litre and diesel by Rs 9.52 in BJP ruled states and UTs - from Ladakh to Puducherry - as they matched the central government's announcement of a cut in excise duty with slashing of local sales tax (VAT) rates.

Buckling under pressure, the Union government had on Wednesday cut excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre to give reprieve to consumers battered by record-high retail fuel prices.

Also read: Petrol, diesel VAT down by Rs 7 a litre in Chandigarh after Centre's excise duty cut

This announcement was matched by 22 states and Union Territories cutting VAT rates in different proportions.

This has led to BJP and its partner ruled states witnessing steeper reductions in petrol and diesel prices in comparison to Maharashtra, Delhi, West Bengal and other states that are governed by other political parties, according to a price chart of different locations prepared by state-owned oil firms.

The additional reduction, on top of the excise duty cut, is the lowest in Uttarakhand because of lower duty cuts and the highest in UT of Ladakh. On petrol, the price reduction over-and-above excise reduction ranges from Rs 1.97 per litre in the case of Uttarakhand to Rs 8.70 in the case of UT of Ladakh.

For diesel, the additional reduction warranted by VAT cuts, ranging from Rs 17.5 a litre in Uttarakhand to Rs 9.52 in the case of Ladakh.

The states and UTs that extended additional VAT benefits are Karnataka, Puducherry, Mizoram, Arunachal Pradesh, Manipur, Nagaland, Tripura, Assam, Sikkim, Bihar, Madhya Pradesh, Goa, Gujarat, Dadra & Nagar Haveli, Daman & Diu, Chandigarh, Haryana, Himachal Pradesh, Jammu & Kashmir, Uttarakhand, Uttar Pradesh and Ladakh.

Karnataka saw Rs 8.62 a litre cut in petrol price due to VAT reduction and Rs 9.40 in diesel rates, while Madhya Pradesh gave its citizens an additional Rs 6.89 price relief on petrol and Rs 6.96 on diesel. Uttar Pradesh lowered VAT on petrol by Rs 6.96 and diesel by Rs 2.04 a litre.

States that have so far not lowered VAT include Congress and its allies ruled Rajasthan, Punjab, Chhattisgarh, Maharashtra, Jharkhand and Tamil Nadu. AAP-ruled Delhi, TMC-governed West Bengal, Left-ruled Kerala, BJD-governed Odisha, TRS-led Telengana and YSR Congress-ruled Andhra Pradesh.

Also read: Fuel price cut will bring relief to poor, middle class: CT Ravi

Wednesday's excise duty cut had translated into a reduction in the price of petrol in the range of Rs 5.7 to Rs 6.35 per litre across the country and diesel rates by Rs 11.16 to Rs 12.88.

Since states charge local sales tax or VAT not just on the base price but also on the excise duty levied by the Centre, the total incidence of price reduction was higher than Rs 5 a litre cut in excise duty on petrol and Rs 10 per litre cut in diesel. The reduction was larger in states with higher VAT.

In Delhi, the reduction in petrol price was Rs 6.07 per litre, and that on diesel was Rs 11.75, according to the price chart.

After duty changes, the costliest petrol is sold in Rajasthan at Rs 111.10 per litre (Jaipur), followed by Mumbai (Rs 109.98) and Andhra Pradesh (Rs 109.05). The fuel is below Rs 100-a-litre-mark in most BJP ruled states baring Karnataka (Rs 100.58), Bihar (Rs 105.90), Madhya Pradesh (Rs 107.23) and Ladakh (Rs 102.99).

Similarly, the costliest diesel is now sold in Rajasthan at Rs 95.71 a litre (Jaipur), followed by Andhra Pradesh (Rs 95.18) and Mumbai (Rs 94.14).

The cheapest diesel is in Mizoram at Rs 79.55 a litre.

Petrol costs Rs 103.97 per litre in Delhi, and diesel is sold for Rs 86.67 per litre.

VAT rates differ from state to state, leading to differential rates of fuel.

The excise duty cut announced on Wednesday night was the highest-ever reduction in excise duty. It rolls back a part of the Rs 13 and Rs 16 per litre increase in taxes on petrol and diesel effected between March 2020 and May 2020 to avoid passing on to consumers the sharp fall in international oil prices at the onset of the Covid-19 pandemic.

That hike in excise duty had taken central taxes on petrol to their highest level of Rs 32.9 per litre and that on diesel to Rs 31.8 a litre.

The tax cut follows an unrelenting hike in international oil prices, pushing pump rates across the country to their highest-ever levels. While petrol soared to above Rs 100-a-litre-mark in all major cities, diesel had crossed that level in more than one-and-a-half dozen states.

The total increase in petrol price since the May 5, 2020, decision of the government to raise excise duty to record levels had totalled Rs 38.78 per litre. Diesel rates have, during this period, gone up by Rs 29.03 per litre.

The relentless increase in fuel prices had been severely criticised by the Opposition parties, particularly Congress, which had demanded that the government reduce its excise duty.

Based on April to October consumption numbers, the loss of revenue to the government due to the excise duty cut will be Rs 8,700 crore per month. This totals to an annual impact of over Rs 1 lakh crore, industry sources said. For the remainder of the current fiscal, the impact would be Rs 43,500 crore.

Data available from the Controller General of Accounts (CGA) in the Union Ministry of Finance showed excise duty collections during April-September 2021 surged to over Rs 1.71 lakh crore, from Rs 1.28 lakh crore mop-up in the same period of the previous fiscal.

Also read: Petrol politics kicks in ahead of polls as states go for tax cut

For the full 2020-21 fiscal, excise collections were Rs 3.89 lakh crore and Rs 2.39 lakh crore in 2019-20, the CGA data showed.

After the introduction of the Goods and Services Tax (GST) regime, excise duty is levied only on petrol, diesel, ATF and natural gas. All other goods and services are under the GST regime.

Minister of State for Petroleum and Natural Gas Rameswar Teli had in July told Parliament that the Union government's tax collections on petrol and diesel jumped by 88 per cent to Rs 3.35 lakh crore in the year to March 31, 2021 (2020-21 fiscal) from Rs 1.78 lakh crore a year back.

Excise collection in the pre-pandemic 2018-19 was Rs 2.13 lakh crore.

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