States can cut petrol price by Rs 3 and diesel by Rs 2 a litre: SBI report

NEW DELHI:  States such as Maharashtra, Rajasthan and Gujarat have room to cut diesel price at least by Rs 2 per litre and petrol price by Rs 3 per litre each without impairing their VAT revenue from oil, a report said. According to the State Bank of India (SBI) report, states have gained Rs 49,229 crore from VAT revenue on fuel when oil prices were increasing.

Thus, the bigger states such as Maharashtra, which have a lower debt-to-GDP ratio have significantly large fiscal space for lowering their tax on diesel and petrol by even up to Rs 5. They have compelling reasons to adjust taxes on fuel. “Our estimates indicate that states have gained Rs 49,229 crore from VAT revenue on fuel when oil prices were increasing and the states will forego Rs 15,021 crore when the oil price has been downwardly adjusted through excise cut. This implies that gains still outstrip the revenue forgone by Rs 34,208 crore and hence states can further cut the oil prices,” reads the reads report.

Recently, the government reduced central excise duty on petrol by `8 per litre and on diesel by Rs 6 per litre.  Subsequently, finance minister Nirmala Sitharaman urged states to reduce VAT to give people further relief from boiling transport fuel. Among the states, Maharashtra has gained the maximum revenue from VAT, followed by Gujarat and Telangana. However, fuel prices in Gujarat are much lower than in Telangana and Maharashtra. In fact, the average VAT on petrol in Maharashtra, Telangana and Andhra Pradesh is around 29.6%.

Pumps in 24 states not to buy fuel today 
New Delhi: Nearly 70,000 petrol pumps in 24 states will not buy petrol and diesel from oil marketing companies (OMC) on May 31, 2022, in protest against no revision in their commissions. State petrol dealers‘ associations said despite the rise in fuel prices, the dealer margins have not been revised since 2017. Thus, the association demanded reimbursement of their losses on account of the recent cut in excise duty on petrol and diesel.

“Dealer associations welcome the relief given to citizens by the government in reducing fuel prices. However, these sudden cuts have led to huge financial loss for the dealers. The government in the past six months have announced two major cuts in excise duty and the burden of Rs 13/litre on petrol and Rs 16/litre on diesel was passed on to the petrol pump dealers,” said the association.