Dharmendra Pradhan urges states to slash VAT on fuel

New Delhi: Petroleum Minister Dharmendra Pradhan on Wednesday said that if states slash VAT on fuel by 5 percent, the consumers will get more relief.

"We have proactively cut excise duty. Now it is the turn of states to reduce VAT," he said. Unlike the Centre, states levy VAT as an ad valorem duty which rises every time there is an increase in price.

“We urge states to take responsibility just like the centre did, in direction of consumer interest,” Pradhan said. He further added that the finance minister will be writing to all the states regarding slashing VAT levied on fuel.

"States are the biggest beneficiary. They get all of the VAT collection plus they also get 42 percent of the central excise collections. The amount remaining with the Centre is used to finance centrally sponsored schemes in states," he said.

Petrol price was today cut by Rs 2.5 per litre and diesel by Rs 2.25 following the reduction in excise duty on auto fuels.

Petrol in Delhi now costs Rs 68.38 a litre, down from Rs 70.88. A litre of diesel now comes for Rs 56.89 as against Rs 59.14 previously, according to Indian Oil Corp (IOC), the nation's largest fuel retailer.

The government had yesterday cut excise duty on petrol and diesel by Rs 2 per litre each to moderate the relentless rise in fuel prices over the last three months.

Normal or unbranded petrol currently commands a basic excise duty of Rs 8.48 per litre, special additional excise duty of Rs 7 a litre and additional excise duty of Rs 6. The total excise incidence on branded petrol is Rs 22.66 per litre with basic excise duty is charged at higher rate of Rs 9.66.

Unbranded diesel attracts basic excise duty of Rs 10.33 per litre, special additional excise duty of Re 1 and additional excise duty of Rs 6 per litre. Branded diesel attracts Rs 12.69 per litre basic excise duty, Re 1 a lire additional excise duty and Rs 6 special additional excise duty.

State-owned oil companies in June dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost. Rates during the first fortnight starting June 16 dropped but have been on the rise since July 4.

Previously, the rates were changed every fortnight but since June 16 they are revised daily to immediately pass on any movement in international oil prices to consumers and avoid sharp spikes by spreading them in small doses.

With Agency Inputs