Cut local tax on diesel, LPG: Centre to states

HYDERABAD: A day after characterising the hike in diesel and LPG prices as not a very steep one, the Union government turned to state governments to beg them to take the sting out of it. Union finance minister Pranab Mukherjee -- one of the several ministers who struck nonchalant poses Friday -- wrote to state governments Saturday, requesting them to lower local taxes on the two products to ease the burden on the aam aadmi.On a day of countrywide protests, the Congress asked states ruled by it to cut taxes according to their capacity.Here in Andhra Pradesh, officials indicated that the centre’s entreaties are not likely to be heeded, the state’s finances being in a worse condition than the Centre’s.The final call will be taken by chief minister Kiran Kumar Reddy, who will incidentally be in Delhi on the morrow.But the advice being rendered to him by officials is not to cut value-added tax (VAT) rates applicable to petroleum products.The Centre’s hike in the prices of diesel, kerosene and LPG by Rs 3, Rs 2 and Rs 50 respectively is expected to fetch the state some Rs 480 crore in windfall VAT revenues.Not only is no relief likely from this hike, people in AP may also see their pockets pinched further due to its domino-like effects: the RTC is pressing for a fare revision and truck operators have announced a hike of 20 per cent in tariffs.About Rs 660 crore litres of diesel and 9.6 crore LPG cylinders are sold in AP, contributing to the Rs 6,500 crore per annum earned by way of VAT and other taxes on petroleum products. The latest diesel and LPG price hike is likely to boost the state’s VAT accruals by about Rs 460 crore and Rs 20 crore respectively.The government slaps 22.5 per cent VAT on petrol and diesel, the highest rate in the country.Officials rule out announcing any such subsidy on LPG cylinders. “The hike in cylinder prices will cast an additional burden of Rs 375 crore on consumers and the state cannot absorb that. That would only molly coddle people,” said an official.Meanwhile, the APSRTC is gearing up to hike fares. Its chairman M Satyanarayana Rao said the loss-making utility will be burdened by about Rs 190 crore per annum due to the diesel price hike. The RTC has accumulated losses of Rs 1,900 crore.B Prasada Rao, APSRTC managing director, said fare hike proposals will be submitted to the government in a couple of days. If not a fare hike, APRTC is lobbying for exemption from motor vehicle tax and VAT on diesel.