Special Correspondent

Revenue of State will not be affected, says Deshmukh

Reduction of 80 paise and 30 paise in petrol and diesel prices Demand for diesel would fall by three per cent

MUMBAI: Maharashtra has slashed its value added tax (VAT) on petrol and diesel, effecting reduction of 80 paise and 30 paise in prices of petrol and diesel respectively in the State.

Chief Minister Vilasrao Deshmukh told reporters after the Cabinet meeting that the VAT on petrol in Mumbai, Thane and Navi Mumbai was reduced from 30 per cent plus Re. one to 28 per cent plus Re. one and on diesel, from 34 per cent plus Re. one to 33 per cent plus Re. one.

For the rest of Maharashtra, the VAT on petrol is cut from 29 per cent plus Re. one to 27 per cent plus Re. one and on diesel, from 31 per cent plus Re. one to 30 per cent plus Re. one.

The tax on the fuel oils is one of the major sources of revenue for Maharashtra.

The State earns Rs. 5,600 crores from the tax on petrol and diesel. This was expected to rise by about Rs. 350 crores with the hiking of petrol and diesel prices. The reduction in the VAT results in the State earnings remaining constant. "The revenue of the State is not going to be affected by this cut," Mr. Deshmukh said.

Though the tax is called VAT in Maharashtra, in effect it is the same motor spirit tax like in other States for want of uniformity. The Union Government had, in the past, suggested to the States to reduce the tax to 20 per cent but refused to make good the revenue losses that they would suffer as a result, and allowed the latter to decide their own tax rate.

The tax on diesel is a politically sensitive issue because of its use in running tractors for agriculture. In Punjab the diesel is taxed at 8.8 per cent and in Delhi at 12.5 per cent. These States find it difficult to raise the tax to 20 per cent to achieve the national uniformity.

On the other hand, diesel is used mainly for heavy transport in the southern states. The truckers arriving in from the north come with extra fuel tanks filled with cheaper diesel and prefer not to buy fuel in the south. This results in revenue loss.