With domestic fuel prices surging since mid-August, at least 19 out of the 29 states in India can cut petrol and diesel prices to provide some respite to the consumers, a report by State Bank of India (SBI) showed.
According to the report, petrol prices could see a reduction of Rs 3.20 per litre while diesel prices may fall by Rs 2.30 per litre only if the state governments were to use the incremental revenue earned on the sale of fuel across states due to variation in value added tax (VAT).
In the last 6 months, petrol and diesel prices have increased by Rs 5.60 and Rs 6.31, respectively in Delhi. With this increase, petrol prices crossed Rs 89 litre in Maharashtra (highest).
The variation in prices in different states is primarily due to different rates of VAT, for e.g., Maharashtra (39.12 percent per litre) has the highest rate of VAT on petrol and Goa (16.66 percent per litre) has the lowest. All other states lie in this range only, a research by SBI showed.
"This increase in petrol and diesel prices gives states a windfall gain of about Rs 22,700 crore because of tax. There are central excise duty, transportation costs, commission costs and other charges that are levied on the input price. On top of these, the state tax/VAT is levied," the report said.
Since the states are getting surplus revenue, they can cut the petrol and diesel prices without affecting their revenue arithmetic.
"However, states are not doing this, only to manage their unforeseen expenditure like farm loan waiver in Uttar Pradesh, Maharashtra, Karnataka, etc," the report suggested.
The 19 states that can reduce fuel prices are Andhra Pradesh, Bihar, Chattisgarh, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttarakhand, Uttar Pradesh and West Bengal.
Out of these 19 states, three states - West Bengal, Andhra Pradesh and Rajasthan have already announced a slash in the petrol and diesel prices.