Wednesday, June 18, 2008

Hint on Petrol Price?

Petrol prices may come down
BS Reporter / Chennai/ Bangalore June 18, 2008, 2:39 IST

Pressured by the industry and the general public to neutralise the impact of the recently-effected fuel price hike, the Karnataka government has commenced a brainstorming session on the extent of downward calibration of sales tax on petro-products that can be allowed.

The quantum of reduction will be decided at the cabinet meeting to be held on Thursday, home minister V S Acharya told reporters here on Tuesday while officials in the finance department hinted at a one rupee cut on every litre of petrol and diesel.

"We will also decide on where the reduction should be effected —- petrol, diesel or LPG," Acharya said. The announcement comes in the backdrop of the meeting of the empowered committee of finance ministers held in New Delhi on Monday where the states had agreed to reduce sales tax on petro-products.

Karnataka too resolved to join the bandwagon, but with a rider. "The Centre should bear 50 per cent of the loss incurred by the state government because of the tax-cut," Acharya said.

To substantiate the demand, Acharya pointed to several welfare schemes that have been taken up in the state in anticipation of taxes from the sale of fuel. "The state government expected an additional Rs 380 crore because of the recent hike.

Now, if the taxes have to be cut, the state's exchequer would incur a huge loss and that would affect development programmes badly. So it is pertinent that the Centre supports the state government," Acharya said.

In fact, the fuel hike has caused losses to the tune of Rs 170 crore to the state-owned public transport corporations and transport bills of all the government departments have increased by Rs 40 crore, he said and warned that a reduction would offset the arithmetic and make resource-mobilisation a difficult task for the state government.

Karnataka, in fact, has not reduced taxes on petro products in the last one decade. The cabinet may not go in for a major reduction as taxes on petro-products are a major sources of revenue for the state government, nearly Rs 3,400 crore is generated from sales of petrol and diesel.

Per day consumption of petrol and diesel in the state is Rs 31 lakh litres and Rs 81 lakh litres repectively. The state government, which has kept the petro products out of the VAT regime and is instead following the ad valorem system, charges 28 per cent sales tax on petrol and 20 per cent on diesel.

This apart, there is a five per cent entry tax that is levied on every litre of petrol and diesel that enters the state.


mohan said...

As for as i know all oil companies in india are in the huge loss (even though central govt has taken some tax cuts) for the increase of around 40$ per barrel here petrol is dearer by just 5.5rs
but the burden need to be more but we are still benifitted, so i don't think this will not have much impact what i suggest is to cut the cost in u r govt offices by making limited use of resources.

ProactiZen said...

Correct me if I'm wrong, but I don’t think oil companies in India are running under loss, they may be making less profit though(there is a difference u c).
And Rs.5.50 increase is almost equivalent to increase of petrol price in OECD countries. Please note that $40.00 increase is for Crude Oil, and not Petrol.