Ruchika M Khanna

Tribune News Service

Chandigarh, November 7

The Punjab Government today reduced the value added tax (VAT) on two major retail fuels, petrol and diesel, slashing their retail price by Rs 10 and Rs 5 a litre, respectively.

Relief not enough

The government should have further reduced the price of diesel and brought it on a par with neighbouring states, as it is more widely consumed than petrol. —Monty Sehgal, Petroleum dealers’ association

As a result, the price of petrol across Punjab will drop to Rs 95-Rs 96.16 per litre and that of diesel from Rs 83.84-Rs 84.80 per litre from midnight. The variation in price is mainly because local taxes and cesses vary from city to city. The decision to reduce the prices was taken at the Cabinet meeting chaired by Chief Minister Charanjit Singh Channi this afternoon.

In doing so, the common man, burdened by the ever-rising fuel costs, is heaving a sigh of relief. However, the government will lose a whopping Rs 4,150 crore in revenue as the VAT on petrol has been reduced from 27.26 per cent to 13.77 per cent and that on diesel from 17.53 per cent to 9.92 per cent. This will lead to an annual loss in revenue of Rs 3,300 crore (Rs 1,350 crore on account of reduction in price of petrol and Rs 1,950 crore on account of diesel).

Since eight months of this fiscal have already gone by, this year, the state will lose around Rs 1,729 crore as VAT receipts. The state will also lose revenue as the Centre had reduced the excise duty on fuel last week.

Since 42 per cent of this duty is shared by the Centre with states, Punjab’s share in the excise duty will also be reduced by Rs 850 crore. While the decision may help the ruling Congress in the election year, it is sure to cause another blow to the state’s fragile fiscal health. It may be noted the Charanjit Singh Channi government, after taking over the reins of the state in September, has announced sops worth Rs 9,116 crore, including the reduction in VAT on retail fuels. With the state’s debt burden burgeoning at the seams and its income declining, this “pre-election populism” will only add to the state’s debt burden and increase its fiscal and revenue deficits. While announcing the reduction in fuel prices here today, CM Channi and Finance Minister Manpreet Singh Badal claimed the prices of retail fuels will be the lowest in North India.

However, The Tribune found the price of petrol in Punjab is higher than Himachal Pradesh, Haryana and Chandigarh, while that of diesel is higher than Himachal Pradesh, Chandigarh and Jammu and Kashmir, though these are much lower than the prices in Delhi.

Rs9,116 crore worth of sops in 50 days

In the first 50 days of its rule, the Channi government has announced sops that will put an extra burden of Rs9,116 crore on the exchequer. This includes reduction in power tariff which will cost state Rs3,316 crore.