M. Malleswara Rao

Additional Rs. 150 cr. to State after absorbing LPG burden

Total annual outgo on account of LPG subsidy estimated at Rs. 300 cr.

Government not to disturb the applecart of 30 p.c. tax revenue growth

HYDERABAD: A cut in valued added tax (VAT) on petrol and diesel to provide relief to the consumers will be revenue neutral considering the high tax rate in Andhra Pradesh.

With VAT on petrol being 33 per cent and on diesel 22.25 per cent, there will be no dent on the State exchequer if the government takes suitable measures as it did in the case of liquefied petroleum gas (LPG) by absorbing the additional burden of Rs. 50 for each cylinder.

Enquiries with the Finance and Commercial Taxes Departments reveal that the government will earn an additional revenue of Rs. 150 crore even after absorbing the entire burden of the hike in LPG prices.

Going by Finance Minister K. Rosaiah’s own statement, the total annual outgo on account of the subsidy on LPG is estimated at Rs. 300 crore, a figure arrived at on the basis of gas cylinders sold to domestic consumers. As against this outgo, the government has received a virtual windfall of Rs. 450 crore by way of additional VAT collection when the Centre increased the prices of petrol and diesel.


On every litre of petrol and diesel sold, the additional revenue will be Rs. 1.67 and 0.67 paise respectively. In effect, out of Rs 56.65 being paid by consumers for a litre of petrol, a sum of Rs. 14.32 goes as tax to the government and Rs. 7.03 out of the Rs. 38.61 paid on one litre of diesel.

The government is, however, in no mood to relent on the ground that a 30 per cent growth in the tax revenue was projected in the 2008-09 budget and it could not be disturbed, according to Mr. Rosaiah.

Chief Minister Y. S. Rajasekhara Reddy had another justification for this. The government was already subsidising the farmers heavily in sale of fertilizers, in providing debt relief, not to speak of the supply of rice at Rs. 2-a- kg to all people holding white ration cards.

An additional burden would be placed on the exchequer on account of the decision to provide red gram at Rs.30 a kg and edible oil at Rs.45 a kg from next month, he said.