The Hindu : Front Page : State to bear burden of gas cylinder price hike

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Friday, Jun 06, 2008
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State to bear burden of gas cylinder price hike

Staff Reporter

Government likely to reduce rate of VAT, hints Rosaiah

Move to offset hike in prices of petrol and diesel
YSR to hold meeting today to decide on VAT issue

GUNTUR/HYDERABAD: Andhra Pradesh government will bear the entire burden of the Rs. 50 hike announced on each cylinder of domestic liquefied petroleum gas (LPG), Chief Minister Y.S. Rajasekhara Reddy announced here on Thursday.

In respect of petrol and diesel too, the government may offset the steep hike in their prices by reducing the rate of VAT (valued added tax), Finance Minister K. Rosaiah indicated in Hyderabad. It will, however, decide the quantum of the cut in VAT immediately after the Centre works out a formula in line with AICC president Sonia Gandhi’s directive to Congress-ruled States to reduce the tax on the petroleum products.

Dr. Reddy stated at a public meeting organised by Youth Congress, that he did not want the 1.05 crore LPG consumers to suffer on account of the hike, which was caused by circumstances not under his control. “We will subsidise the increased cost to consumers in all categories by spending Rs. 600 crore annually,” he declared.

Making some calculations on the dais along with his Additional Secretary K. Prabhakar Reddy, the Chief Minister said he would hold a meeting on Friday to decide on the lowering of VAT on petroleum prices. In Hyderabad, Mr. Rosaiah said the details are worked out by the officials to be placed before the Chief Minister.

Speaking to reporters, he admitted that the hardship faced by the families on account of the increase in price of petrol, diesel and LPG was “quite natural and understandable”. Meanwhile, Ranjiv R. Acharya, Commissioner, Commercial Taxes, and other senior officials sat the whole day on Thursday making calculations about the likely loss in additional revenue if the government opted to slash the VAT.

Fresh hike

A senior official told The Hindu that the fresh hike of Rs. 5 and Rs. 3 per litre in the basic price of petrol and diesel respectively would ensure an additional tax revenue of Rs 1.65 per litre of petrol sold and 67 paise on a litre of diesel. The present rate of VAT on petrol is a whopping 33 per cent and that on diesel is 22.25 per cent.

In effect, for every litre of petrol dispensed, the government will earn Rs. 14.32 and for diesel Rs. 7.03. It earned a huge sum of Rs. 5,701 crore through levy of VAT on petro-products, including natural gas supplied to power projects by ONGC and Cairns, in 2007-08.

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