The Hindu : Front Page : Taxes send fuel prices soaring

Online edition of India's National Newspaper
Thursday, Jun 05, 2008
ePaper | Mobile/PDA Version

Front Page

Front Page

Taxes send fuel prices soaring

Karnataka Bureau

State levies on petroleum products among highest in the country

Bangalore: The price of petrol in Bangalore has gone up from Rs. 52.86 to Rs. 58.47 a litre, and that of diesel from Rs. 36.40 to Rs. 39.76 a litre. Domestic liquefied petroleum gas (LPG) will cost Rs. 50 more a cylinder, upon which value-added tax will be applied at 4 per cent.

Although the Union Government’s decision to increase petrol and diesel prices was announced on Wednesday morning, utter confusion prevailed in Bangalore on the quantum of increase. Following the announcement, motorists started queuing up at many petrol outlets.

No clarity

There was no clarity in the State Government regarding the magnitude of the hike. Even by late evening, Finance Department sources said they were yet to receive any communication from the Centre or from the Petroleum Ministry in this regard.

State Government sources told The Hindu that senior officials of were in touch with officials of the Petroleum Ministry, who were unable to ascertain the details of the hike.

“We have been seeing the announcement on television. We can convey the final sale price in the State only on Thursday after receiving the official communication,” they said.

In a letter to Prime Minister Manmohan Singh, Chief Minister B.S. Yeddyurappa has expressed shock over the steep increase in fuel prices. The Chief Minister said that the hike would only fuel inflation further since transportation costs too would go up.

Yeddyurappa’s plea

Mr. Yeddyurappa asked the Union Government “to further subsidise the prices of petroleum products to help the common man” “Immediate measures should be initiated to check inflation,” he said.

The increase in fuel price may impose a heavy burden on people all over the country, but it will be particularly harsh on the people of Karnataka.

Taxes levied by the State on petroleum products are among the highest in the country.

The incidence of taxes on petrol in the State is 64 per cent on the base price of petrol, while it is only 36 per cent in Tamil Nadu and 40 per cent in Andhra Pradesh.

In the case of diesel, which is the more important fuel in terms of economic impact, the tax burden in Karnataka is 32 per cent whereas it is only seven per cent in Tamil Nadu and 29.5 per cent in Andhra Pradesh.

It is estimated that roughly half the revenue of State governments come from taxes on petroleum products. However, the high differential between fuel prices in Karnataka and the neighbouring States could lead to reduction in sales in the State. In particular, truckers on long inter-State hauls would prefer to fill up in the neighbouring States rather than in Karnataka.

Panikar, president of the Bangalore Chamber of Industry and Commerce (BCIC), urged the State Government “to look at the option of reducing sales tax (rates) on petroleum products, which is one of the highest in the country”.

The impact of the hike would be felt across the economy, particularly in the transportation and manufacturing sectors.

Energy-intensive sectors such as steel, chemicals and cement would be under great pressure following the hike, he said.

“The resulting impact on retail prices would take inflation to new and unsustainable levels,” he said.

Mr. Panikar pointed out that several critical agricultural inputs are petroleum-based, and this would mean that the agricultural sector could come under more pressure.

Printer friendly page
Send this article to Friends by E-Mail

Front Page