Telangana govt under pressure to cut VAT on petrol, diesel

Hyderabad: The Telangana government seems to be under pressure to cut VAT (value-added tax) on petrol, diesel after several states did so in the last two days following the Centre cutting down fuel prices.

Opposition parties and civil society organisations are strongly demanding the state government to cut VAT which is among the highest in the country. The state government imposes 35.2 per cent VAT on petrol 27 per cent on diesel.

There is also a strong demand from various associations of petrol pumps in the state to cut VAT to bring down fuel prices on par with the neighbouring states. If not, they fear, around 200 petrol pumps located within a radius of 50-kilometres bordering Karnataka and Maharashtra would face closure.

Karnataka slashed VAT on petrol, diesel by Rs 7 per litre. With this, the petrol price decreased to Rs 100.58 per litre and diesel to Rs 80.01 per litre. Although Maharashtra did not slash VAT rate so far, the price of diesel is lower than Telangana. In Hyderabad, petrol costs Rs 108.20 per litre and diesel Rs 94.62. There is a price difference of Rs 7.62 per litre for petrol and Rs 14.61 per litre for diesel.

Petrol pumps on borders witness more diesel sales than petrol with huge consumption by transportation vehicles. The price variation has led to almost zero diesel sales on state borders in Telangana due to which around 200 petrol pumps face closure if VAT is not reduced accordingly.

"It's not just petrol pumps, even the state government will suffer huge losses as fuel sales will dip in Telangana. This translates to lower fuel sales and lower VAT collection for state government. The government has to take a decision on VAT reduction without any further delay in its own interest and also in the interest of petrol pumps in state," said Rajiv Amaram, joint secretary, Confederation of Indian Petroleum Dealers (CIPD).

The Telangana Petroleum Dealers Association is also deeply concerned over the fate of petrol pumps on state borders. "There are around 2,000 petrol pumps in Telangana of which nearly 200 are located on state borders alone. They are sitting idle for the past two days with no sales. If the same situation continues, there is no option for them but to shut down the petrol pumps," said G. Vinay Kumar, founder secretary, TS Petroleum Dealers Association.

The VAT on fuel remains the major revenue earner for the state government. The state government is earning nearly Rs 1,000 crore per month through VAT on fuel. However, there has been no move from the state government to cut VAT on fuel so far.

Officials say, Chief Minister K. Chandrashekar Rao has to take a call on this issue. The Chief Minister himself holds the portfolio of commercial taxes department which collects VAT.

Official sources in the commercial taxes department say there has been no communication from the Chief Minister's Office (CMO) regarding holding a meeting to discuss VAT cut so far.

The ruling TRS has made spiralling fuel prices as its main poll plank to target the BJP in the recent Huzurabad bypoll. It demanded that the BJP government at the Centre to cut taxes to bring down fuel prices. Now that the Centre has reduced taxes, there is an increased demand on the Telangana government to follow suit if it is really concerned about price rise.