Petrol Price Hike: A token relief of Rs. 1.50 in offing :HT

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Delhi residents could expect some relief after the highest-ever increase in petrol prices was announced on Wednesday. The Sheila Dikshit government can announce a cut in value added tax (VAT) to bring down petrol prices on the lines of Kerala and Uttarakhand. The Union government on Wednesday had jacked up prices by Rs 7.53 a litre. The fuel now costs Rs 73.18 a litre in the Capital.

While Dikshit could not be contacted, government sources said the chief minister has already hinted at the relief. The petrol prices will come down by up to Rs 1.50 a litre and would cost Rs 71.58 a litre if the government decides to slash VAT.

The government had taken a similar step when the Centre increased the price of diesel by Rs 3 per litre in June 2011, reducing its price by 37 paise a litre.

According to sources, the tax component on petrol amounts to R26.98 on a litre of petrol. While the share of the Centre is Rs 14.78, Delhi gets Rs 12.20 or 20% as value added tax. Though there has been a demand of reducing VAT to 12.5%, sources said the government may waive off tax on the increased amount rather than reducing tax rate.

“Reducing VAT on petrol and diesel may seriously impact Delhi’s overall tax collection. The government is more likely to waive off VAT on a small amount, ” a government official said.

The Delhi Petrol Dealers’ Association said the government should also cut VAT on diesel to bring its prices at par with Haryana. The step could stem losses pumps in Delhi suffer when customers flock to the neighbouring state to refuel. “The small waiver that Delhi government gave last year did not help much,” DPDA general secretary Nishit Goel said.