New Delhi: Last week, the Central Government decided to revise the diesel price every month. Till now, there has been no significant protests by any opposition ruled state government against the decision. The reason behind it lies in the fact that with the respective increases in the prices, states’ earning are also going to be raised.

The state governments charge 10-25 percent VAT on diesel. Now with the increase in the diesel prices, they are expected to get additional revenue of Rs 10,000 crore.

The hike in diesel price is also going to increase the kitty of the Centre. According to the sources, the Finance Minister P Chidambaram is busy in devising ways to restrict the fiscal deficit at 5.3 percent. Chidambaram is also mulling to increase the current excise duty of Rs 3.46 per liter on diesel. There is every chance that the government may wash its hands of duty cut on petroleum products in the next budget. Apart from that, there is every chance that the government may announce increase in the customs duty on petroleum products and crude oil.

According to experts, the diesel price hike is going to benefit more to the non-Congress ruled states. Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Tamil Nadu impose maximum VAT. Congress ruled Andhra Pradesh and Maharashtra charge more than 20 percent VAT. In FY 2011-12, all the states cumulatively procured Rs 60,000 crore from VAT on petroleum products. It is expected to go up to Rs 75,000 crore in the current financial year. Generally, diesel is the biggest contributor to the state’s revenue.

A large part of the diesel price goes to the Central and state governments. Out of Rs 47.63 per liter of diesel in Delhi, Rs 9.25 goes to the Central and state government. The government has approved oil companies to increase diesel prices by 50 paise every month to recover their losses. By December 2013, diesel price will be increased by Rs 6.5 per liter. It is certain to give boost to the revenue collection of the states.

VAT on Diesel (In percent)

Uttar Pradesh --- 17.23

Bihar --- 18

Punjab --- 9.08

Haryana --- 9.70

Jharkhand --- 18

Delhi --- 13.29

Himachal Pradesh --- 9.70

Chhattisgarh --- 25

Madhya Pradesh --- 24.23

Andhra Pradesh --- 22.25

Gujarat --- 24.63

West Bengal --- 18.93

Jammu & Kashmir --- 14.65

Maharashtra --- 21


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