VAT a blow to TS exchequer

Diesel and petrol sales in Telangana have been dealt a body blow after the government imposed `2 additional VAT per litre. It is forcing the government to seriously reconsider its decision. The government is likely to rollback the VAT hike anytime soon.

The impact is more on diesel sales than petrol which fell drastically as heavy motor vehicles crossing inter-state borders opt to refuel in AP and other neighbouring states’ pumps located on the border to save up to `2.50 per litre. The government had aimed to earn about `75 crore as revenue per month through additional VAT but the fall in sales has resulted in a loss of over `100 crore.

The business of petrol pumps is largely dependent on transport vehicles, whose sales contribute 80 per cent of their total business. Pump owners say the government’s VAT policy has backfired and needs to be rectified at the earliest to save it and pump owners from incurring huge losses.

The major chunk of sales that is about 30 per cent of diesel is purchased by the vehicles from neighbouring states.

Hyderabad: Many transport vehicles have stopped refuelling in Telangana from January 16. The 2 VAT has resulted in escalation of price by 1.80 to 3.76 per litre in TS.

Transport vehicles have a fuel tank capacity ranging from 350 litres to 1,400 litres. Normally they opt for full tank refuelling. However, from January 16, drivers are seeking refuelling at TS pumps for only 500 or 5,000. If they fill full tank in TS, they pay 1,050 more for 350 litres and 4,200 more for 1,400 litres as diesel is costlier by 3 in TS.

“This is making truckers bypass TS. It is bringing down fuel sales in border area petrol pumps by 40 to 50 per cent and in the other pumps by 20 to 30 per cent. The loss in sales has a cascading effect as the sales lost also entails a loss of revenue by way of 19.22 per cent VAT and additional loss of 30 per cent of excise duty which is the state’s share from the petro products sale. So the imposition of VAT is working in a reverse direction with the state’s petro revenue going down,” said Vinay Kumar, general secretary, Telangana Petroleum Dealers’ Association. Dealers are concerned that around 1,500 pumps located on highways in TS would have to close down, if the same situation continues for a few more days. “The loss of sale questions the economic viability of small and rural dealers who account for around 1,500 families. Each pump gives direct employment to at least 10 to 12 persons and they are the bread winners for their families. It implies that at least 20,000 families along with 1,500 dealer families will be in dire straits and in some cases unemployed. Added to that is around 4,000 fleet of tanker trucks which employ at least 8,000 people. They will be badly affected making them unviable to ply because of low volume of sales,” Mr Kumar added.