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Explained: Why are Rajasthan fuel prices, the subject of Shyam Rangeela’s comedy, so high?

Rajasthan imposes a higher VAT than many other states. Also, prices in far-flung Sriganganagar, where the comedian shot his video, are much higher than in Jaipur

Written by Deep Mukherjee , Edited by Explained Desk | Jaipur |
Updated: March 4, 2021 10:28:30 am

Last month, petrol prices in Rajasthan districts such as Sriganganagar crossed the Rs-100 mark, which became a talking point on social media after comedian Shyam Rangeela made a video at a fuel pump.

The prices of petrol and diesel in Rajasthan are among the highest in the country. The opposition BJP has blamed the state’s Congress government for pushing automobile fuel prices up to these levels.

Why is the state government being blamed for the high fuel prices?

On September 9, 2018, ahead of Assembly elections, then Chief Minister Vasundhara Raje’s BJP government had issued a notification bringing the value-added tax (VAT) on diesel down to 18% from 22%, and that on petrol to 26% from 30%.

After Ashok Gehlot’s Congress government came to power, however, VAT on petrol and diesel was increased to 30% and 22% respectively in July 2019.

Thereafter, through the Covid-19 pandemic, the Rajasthan government repeatedly increased VAT — in March 2020, from 30% to 34% on petrol and from 22% to 26% on diesel; in April to 36% and 27% on petrol and diesel respectively; and in May, to 38% and 28% on petrol and diesel respectively.

Following much criticism of the high tax rates, the government finally cut the tax by 2% in January this year.

How did this increase in taxes impact auto fuel prices in Rajasthan?

Taxes imposed by the Centre and states are a significant contributor to the price of petrol and diesel that consumers pay. To the base price of the fuel (which includes the cost of refinery processing and margins, and oil marketing company margins and cost of freight etc) is added excise and cess levied by the Centre, VAT imposed by the states, and commission to the dealer.

VAT varies from state to state, which accounts for the fact that fuel is more expensive in some states than in others. Rajasthan, Madhya Pradesh, and Andhra Pradesh impose the heaviest VAT burdens among all states in the country. (More on this in the answer to the next question)

With each increase in VAT, therefore, the pump prices of diesel and petrol also increased in Rajasthan. Prices in Sriganganagar, located in the northwestern corner of the state, very close to the borders with Punjab and Pakistan, were even higher than in the rest of the state owing to the costs involved in transporting the fuel from depots to pumps in the district. Premium petrol went past the Rs-100 mark in Sriganganagar in January, and last month, even normal petrol started to cost that much per litre.

“Earlier we had depots of oil companies in Hanumangarh district, adjacent to Sriganganagar district. But oil companies closed those depots to save costs. Now fuel is supplied to Sriganganagar from Jaipur and Jodhpur (about 470 km and 500 km away respectively). As a result, to transport the oil, for every litre, Rs 4 per litre is being charged. That is why the increase in fuel prices impacts Sriganganagar more than other places in Rajasthan,” Suneet Bagai, president, Rajasthan Petroleum Dealers’ Association, said.

As of March 1, normal petrol cost Rs 97.72 per litre and diesel Rs 89.98 per litre in Jaipur, and Rs 102.04 and Rs 93.95 respectively in Sriganganagar.

What is the VAT imposed per litre on auto fuels in Rajasthan currently, and how does the state compare with other states in this regard?

According to latest available data from the Petroleum Planning & Analysis Cell at the Ministry of Petroleum and Natural Gas, the state taxes levied in Rajasthan on petrol is 36 per cent VAT + Rs 1,500/kilolitre (kl) road development cess. For diesel, VAT is 26 per cent + Rs 1,750/kl road development cess. This translates to state taxes of Rs 26.97/litre on petrol, and Rs 19.96/litre on diesel.

BJP-ruled Manipur imposes the biggest VAT of 36.50 per cent on petrol, and 22.50 per cent on diesel. Madhya Pradesh, also ruled by the BJP, imposes a VAT of 33 per cent on petrol and 23 per cent on diesel, and YSRCP-ruled Andhra Pradesh, 31 per cent and 22.25 per cent on petrol and diesel respectively.

Among the states that impose a lower VAT are Congress-ruled Punjab (24.79 per cent) and Chhattisgarh (25 per cent), and Maharashtra (25 per cent), where the Congress shares power with the Shiv Sena and NCP.

What have the political parties said on the prices of auto fuels?

The opposition BJP has slammed the Congress government. In January, Vasundhara Raje said that during her tenure, the government had cut VAT on petrol and diesel by 4 per cent, and government revenues had taken a hit of Rs 2,000 crore.

Chief Minister Ashok Gehlot has, however, blamed the central government for the situation.

“Some people spread rumours that Rajasthan government levies the most taxes on petrol and that is why rates are the highest here. In BJP-ruled Madhya Pradesh, taxes levied on petrol are more than Rajasthan which is why the price of petrol in Jaipur is less than Bhopal,” Gehlot posted on Twitter last month.

Gehlot said the Covid-19 pandemic had resulted in a massive loss of revenue for the government. He underlined that while the Rajasthan government had reduced VAT rates by 2 per cent in January, the central government had not provided any relief.

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