States can cut fuel prices, says SBI arm

States can slash petrol prices by an average of ` 3.20 a litre and diesel by ` 2.30 per litre, without affecting their revenue arithmetic, the economic research department of SBI said on Tuesday.

Thanks to the recent spikes in fuel prices, the SBI arm expects that states will get an extra revenue of ` 22,700 crore over and above their budget estimates.

“By looking into the $ 1 per barrel increase in oil prices, this translates ` 1,513 crore to all the major 19 states. The largest gain would be in Maharashtra (` 3,389 crore) followed by Gujarat (` 2,842 crore),” said the report.

However, states are not slashing the fuel prices, only to manage their unforeseen expenditure like farm loan waiver in UP, Maharashtra and Karnataka among others, the report said.

“The problem with the states is that even as many states are having a revenue surplus, these states are using the surplus revenue to finance capital expenditure and interest obligations,” said the report.

It said that this windfall gain will have positive impact on state finances, which might push down the states fiscal deficit by 15- 20 basis points.

States across the country impose VAT or sales tax on petrol and diesel which vary from one to another. Due to this prices of petrol and diesel vary across the country.