State’s VAT hike denies Delhi fuel relief

 

New Delhi, 16 Jul 2015: State-run fuel retailers on Wednesday slashed the base price of petrol and diesel by Rs 2 a litre but the benefit will not flow to consumers in Delhi because of the Arvind Kejriwal government’s move to jack up VAT. While consumers in the country will drive away with the benefit, in Delhi they will end up paying 28 paise a litre more on petrol and left with a reduction of only 50 paise per litre on diesel. 

 

The actual reduction in prices in other states would be more than Rs 2 a litre due to an incremental decrease in local levies in each state. The retailers reduced the price to pass on the benefit of falling global crude prices in line with the Modi government’s policy to keep pace with the global trend. 

 

The AAP government after coming to power has given handouts in the form of power and water subsidies. This put a strain on state coffers. The hike in VAT is supposed to shore up the finances. 

 

Earlier in the day, the Delhi government had raised VAT on petrol from 20% to 25% and on diesel from 12.5% to 16.6%. The higher VAT had pushed up the pump price of petrol by Rs 2.78 a litre and diesel by Rs 1.83 per litre. 

 

Interestingly, the state didn’t touch CNG. It tried to justify the hike citing a uniform VAT regime for petro rates in north Indian states. The AAP government had clearly scripted the hike before the budget with a broad consensus reached at a meeting of the finance ministers of north Indian states on May 21. In the budget session, the government created the ground for a hike by amendments to the VAT Act which created enabling provisions for lowering or hiking VAT on various categories of taxable products in the range of 12.5% to 30%. 

 

While the BJP and Congress had pointed out that this was a move to bring about a hike in the prices of petrol and diesel, the AAP government had stuck to its stand that these were just enabling provisions aimed at making way for a uniform tax structure. Deputy CM Manish Sisodia had said in the Delhi assembly the aim was to rationalize the tax regime. No one would have guessed that the hike in fuel prices was less than three weeks away. 

 

BJP’s Vijender Gupta hit out at AAP saying the government was "cheating" the public by imposing this hike after telling people in the budget session that VAT was not being increased and describing it as an "aam aadmi" budget. He warned that this will lead to inflation. 

 

Delhi Congress president Ajay Maken tweeted, "To meet 526cr publicity budget AAP increases Vat 4% on diesel and 5% on petrol- Soon after budget? #FailedGovernance."