In an attempt to compensate the estimated loss of annual income worth Rs 24,500 crore to Rs 26,000 due to the Covid-19 lockdown, the Gujarat government Monday declared a hike of Rs 2 in the prices of petrol and diesel in the state from Monday midnight. Deputy Chief Minister Nitin Patel announced the decision taken by a core group of the state government headed by Chief Minister under the recommendations of Adhia Committee.
After announcing the hike, Patel said that the decision was taken in the interest of the state’s economy and to make both ends meet. He also said that even after the hike of Rs 2, Gujarat has the “lowest rate of petrol in the country and is also among the states where the prices of diesel are lowest”.
The Gujarat government formed a six-member committee of experts headed by former Union finance secretary Hasmukh Adhia on May 13 to recommend measures for the economic revival of the state in the wake of Covid-19 pandemic.
Patel, who also holds the portfolio of Finance, said that owing to the Covid-19 pandemic, all the economic activities had come to a standstill and it resulted in a huge loss of income for the state government. On the other hand, he added, the state government had spent additional amounts to deal with the situation, including Rs 14,000-crore relief package for small businesses, providing shelter and food to around 10 lakh migrant workers, making arrangements for the travel of the migrant workers, making provisions for dedicated Covid-19 hospitals, waiver in electricity duty for customers and extending the loan repayment deadline for the farmers and bearing the burden.
Patel also gave an estimate of losses in the income from various sources of the state government such as GST, VAT on petrol/diesel, stamp duty, tax on sales of motor vehicles and electricity duty.
“On an average, it is estimated that the loss of income will be between Rs 24,500 crore and Rs 26,000 crore,” Patel said.
According to a rough break-up of the estimated loss given by Patel, the state is likely to loss Rs 10,000 crore on GST, Rs 8,000-8,500 crore from VAT on petrol-diesel, Rs 4,000-4,300 crore from stamp duty, Rs 2,000 crore from tax on sale of motor vehicles and Rs 1,300 crore from electricity duty.
He then added that to manage the losses, the state government has already taken various austerity measures like 30% cut in the salary of all the ministers and MLAs and staying dearness allowance of the government employees.
“The government is trying to increase the income and cut the expenses. It is important to make two ends meet. It is in the interest of the people that income and expenses (of the state government) are close to each other. And therefore, the core committee headed by Chief Minister Vijay Rupani has taken this decision of increasing the prices of petrol and diesel by Rs 2 on the basis of recommendations of the Hasmukh Adhia Committee,” Patel said.
According to Patel, “Current rate (before hike) of petrol in Gujarat is Rs 71.88/litre. In our neighbouring state Madhya Pradesh, the rate is Rs 83.82. In Maharashtra, it is Rs 83.60. In Rajasthan, it is Rs 83.14. Other states’ (petrol) rates are costlier by Rs 10-12.”
Similarly for diesel, Patel said, current rate (before hike) in Gujarat is Rs 70.12 per litre, which is 16th in the country.
“Our government had earlier reduced the prices of petrol and diesel two times (in 2017 and 2018) with total cut of around Rs 7%. Whereas, the current hike of Rs 2 is of around 3%. So, (even after this hike) Gujarat is still among the states where the rates of petrol and diesel are the lowest. The decision was inevitable to maintain the income, which has been reduced. If the sale of petrol and diesel is maintained, it is estimated to increase the state’s income by Rs 1,500 to 1,800 crore.”
Patel said that the Adhia Committee has made a number of recommendations, including selling of government assets. However, the government is not considering selling any of its assets, he said, adding, “An appropriate decision on the same will be taken at appropriate time if there is any need.”
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