The latest hike in prices of petrol, diesel and cooking gas by Rs 5 per litre, Rs 3 per litre and Rs 50 per cylinder would not mean that prices of these products would be similar across all states.

A huge disparity exists in sales tax levied by various states across the country. Sales tax are the highest in states such as Maharashtra, Gujarat and Andhra Pradesh. Petroleum ministry officials said the local taxes in these three states are as high as 25 to 30 per cent.

In 2007-08, the 27 states generated a combined revenue of Rs 55,400 crore from local levies in petroleum products. Officials said the figure is expected to swell to Rs 60,000 crore in the current financial year.

Prime Minister Manmohan Singh, in his address to the nation on Wednesday, called for a rationalisation of tax regime of states for petro products.

It is therefore incumbent upon state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies, Singh said.

Industry chambers backed the Prime Ministers opinion on local levies. There is scope for restructuring sales tax regime on petroleum products at the state level, Federation of Indian Chambers of Commerce and Industry (Ficci) said in a statement.