Petrol price further cut by Rs 8, diesel by Rs 9 in 23 states, UTs

New Delhi: 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 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.

This announcement was matched by 23 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, Ladakh and Odisha.

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.

Haryana government has also reduced VAT on petrol and diesel prices to reduce the oil prices on the lines of Central Government, said a government spokesperson on Friday.

After this decision, the price of petrol has come down from Rs 106.94 to Rs 95.27 in the entire State. Also, the diesel price has come down from Rs 98.60 to Rs 86.51.

In order to provide relief to general public from the rising fuel prices Odisha Chief Minister Naveen Patnaik on Thursday announced reduction of VAT of Rs 3/each on petrol and diesel which will be applicable from 5 November (Friday) midnight.

This is over and above the reduction in excise duty announced by Government of India. In view of this reduction, the loss of VAT revenue to state exchequer will be to the tune of Rs 1400 crore per annum. This is in addition to loss in VAT collection @ Rs 1.6/ litre on petrol and Rs 2.8/ litre on diesel, total amounting to Rs 700 crore, which the state is likely to incur in view of Excise duty reduction by Government of India.

Hence the total loss to state exchequer on account of reduction in VAT is approximately Rs 2000 crore but is going as a major relief to the people of Odisha. With this reduction, the petrol & diesel prices in the state is likely to be one of the lowest in the country.

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, TRS-led Telengana and YSR Congress-ruled Andhra Pradesh.

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.