AAP govt rolls back VAT, diesel prices cut by `8.36
Diesel price in the national capital was on Thursday slashed by `8.36 per litre after the AAP government rolled back the value-added tax (VAT) hike that had made the fuel uncompetitive in comparison to adjoining cities of Gurgaon, Noida and Ghaziabad.
Chief minister Arvind Kejriwal announced a reduction in VAT on diesel from 30 per cent to 16.75 per cent, saying the move will help the city's economy recover from the impact of coronavirus pandemic.
The reduction in the VAT rate, which would be effective from Friday, will help bring down the price of diesel to `73.64 per litre. The Delhi government had on May 5 hiked VAT on diesel from 16.75 per cent to 30 per cent.
Diesel price in the national capital was on Thursday slashed by `8.36 per litre after the AAP government rolled back the value-added tax (VAT) hike that had made the fuel uncompetitive in comparison to adjoining cities of Gurgaon, Noida and Ghaziabad. Chief minister Arvind Kejriwal announced a reduction in VAT on diesel from 30 per cent to 16.75 per cent, saying the move will help the city’s economy recover from the impact of coronavirus pandemic.
The reduction in the VAT rate, which would be effective from midnight, will help bring down the price of diesel to `73.64 per litre. The Delhi government had on May 5 hiked VAT on petrol to 30 per cent from 27 per cent and on diesel from 16.75 per cent to 30 per cent.
The move was aimed at increasing Delhi’s revenue, which had dipped by 90 per cent in April because of the Covid-19induced nationwide lockdown restrictions, which were enforced from March 25.
With the reduction in VAT, the diesel prices in Delhi have come down significantly now as compared to other states. While a litre of diesel will cost `73.64 per litre in the national capital, it costs `82.64 per litre in Rajasthan; `81.29 per litre in MP; `79.81 in Maharashtra; `79.68 in Chhattisgarh; and `79.05 in Gujarat.
The May 5 VAT hike had translated into steepest ever price increase of Rs 7.10 per litre in diesel in Delhi. Rates of petrol also went up by `1.67 a litre.
The subsequent increase in the base price of diesel because of a surge in international rates led to an increase in the incidence of VAT as the tax is levied on an ad valorem basis.
The VAT hike made diesel costlier than it was being sold in adjoining cities – Gurgaon, Noida and Ghaziabad, putting local industries using the fuel at a cost disadvantage.
In comparison to preVAT reduction price of `81.94 per litre in Delhi, diesel was priced at `73.83 per litre in Noida, `73.68 in Ghaziabad and `73.98 in Gurgaon.
While Mr Kejriwal announced a cut of VAT on diesel, no reduction on petrol was announced. Petrol in Delhi costs `80.43 per litre while in adjoining Noida it comes for `81.08 and in Ghaziabad for `80.95 and is priced at `78.64 per litre in Gurgaon.
The May 5 hike in VAT rates would have led to `900 crore additional revenue for the state government in a year. “Delhi Cabinet has decided to reduce VAT on diesel from 30 per cent to 16.75 per cent. This will reduce the price of diesel in Delhi from `82 to `73.64 i.e. by `8.36 per litre,” Mr Kejriwal said.
Domestic petrol and diesel prices are determined broadly by crude oil and forex rates and vary from state to state due to VAT.
In the past few weeks, diesel prices have risen on 30 occasions, while petrol rates have risen 21 times. Oil companies began the daily revision of the two auto fuels from June 7 after keeping the price unchanged for 82 days during Coronavirus induced lockdown. Before the start of a daily price surge, petrol was being sold at `71.26 per litre in Delhi and diesel at `69.39 a litre on June 6.
Though Brent crude futures — the global benchmark for oil rates — have recovered from a 21-year low of $15.98 per barrel registered in April, they are still down 33 per cent so far this year.