IndiaPost.com - India oil price hikes softened

NEW DELHI: In a big relief, Delhi, Maharashtra, Tamil Nadu, Andhra Pradesh and Bihar played Good Samaritans to affected people by slashing taxes that made petroleum products a tad cheaper. Prime Minister Manmohan Singh had earlier announced an increase in petrol price by Rs 5 per liter, diesel by Rs 3 per liter and cooking gas by Rs 50 per cylinder in order to bail out bleeding oil marketing companies, unable to raise prices in line with record-high international prices.

The steep rise was made following a decision that was marked by protests and shutdown in Left- ruled states of West Bengal, Kerala and Tripura. Springing to damage control mode, the Congress President and Chairperson of the ruling United Progressive Alliance Sonia Gandhi had asked all Congress-ruled states to cut sales tax on petrol and diesel.

The BJP, joining the race to woo the common man in an election year, has also directed its governments in states to cut taxes on petroleum products. This trails a cut in sales tax by the Left-ruled West Bengal government on petrol and diesel to 12.5 percent from 17.5 percent.

The four states jumped in to cushion as the Prime Minister asked his colleagues to avoid foreign travel and cut back on spending. Delhi, Bihar and Tamil Nadu followed West Bengal's example and announced cut in sales tax on fuel sales to cushion the impact of steep price hike on users.

"As we ask the people to bear some financial burden... It is not only necessary from the resource conservation... But also as a moral duty to cut out wasteful expenditure in our own establishment," he said.

Putting pressure on the states to sugarcoat its bitter pill, Union petroleum Minister and Congress leader, Murli Deora also sent letters to 30 CMs of states/UTs asking them to emulate the Center's example by cutting sales tax on fuels. "Central government, along with oil PSUs, has shouldered about 91 percent of the finance ministry's burden while ensuring ... no increase in PDF kerosene prices... (with) marginal hike in petrol, diesel and LPG rates," Deora told CMs.

"I expect state governments will not be behind in sharing the burden arising from spurt in international oil prices," he said. In Bihar, a day after the Center hiked the prices of petroleum products, the Nitish Kumar-led government slashed sales tax on diesel and petrol.

The government promulgated an ordinance in this regard. Sales tax on petrol had been reduced by 2.5 percent from the existing 27 percent while sales tax on diesel has been brought down by 1.64 percent from 20 percent. This will make petrol cheaper by Rs 1 per liter and diesel by 50 paise per liter in Bihar.

The Tamil Nadu government slashed the sales tax on diesel by two per cent which will cause a revenue loss of Rs.260 crore per annum for the state. In Maharashtra, Chief Minister Vilasrao Deshmukh and finance minister Jayant Patil have convened a cabinet meeting this evening to discuss the possibility of reducing sales tax on petroleum products in Maharashtra.

The Congress government in Andhra Pradesh too is planning to reduce Value Added Tax on petroleum products to partially offset the burden of hike in the prices of petrol and diesel. However, the chief ministers of two BJP-ruled states, Maj Gen (Retd) BC Khanduri, of Uttarakhand, and BS Yeddyurappa, in comments to the media earlier, firmly ruled out reductions in sales tax on petroleum products in their respective states.

While Prime Minister, Manmohan Singh, expressing his inability to shield 'aam admi' from the fuel and LPG price hike, Railway Minister, Lalu Prasad, said Indian railways would "absorb" the impact of the diesel price hike.

The appeal was followed by cut in sales tax on LPG by the Congress-ruled Delhi government, on diesel by DMK-ruled Tamil Nadu and on petrol and diesel by the NDA government in Bihar. The Left-ruled West Bengal government has already slashed sales tax on petrol and diesel by up to five per cent giving a relief of Rs 2.12 and Rs 1.38 a liter on the two fuels respectively.

To top it all, Uttar Pradesh Chief Minister Mayawati threatened to launch an agitation against the price hike, saying tax cut by states was not a permanent solution.