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Should reduce sales tax
July, 23rd 2010

The Petroleum Ministry today reiterated its appeal to state governments to reduce the sales tax component on transport fuels like petrol and diesel to curb inflation and provide relief to the public.

"Due to the increase in prices, a state like Uttar Pradesh alone would get an additional revenue of Rs 350 crore on petrol (and) diesel under present sales tax rates. So the the states should reduce the sales tax burden," Minister of State for Petroleum Jitin Prasada said while dedicating a city gas distribution network to the people of Ghaziabad.

The sales tax rate on petrol is 26.55 per cent in Uttar Pradesh, while the rate on diesel is 17.23 per cent.

Citing the recent reduction in VAT rates by the Delhi government as an example, Prasada said, "State governments should take a cue from this and reduce the sales tax rates."

Petroleum Minister Murli Deora had also called for a reduction in state sales tax and VAT on several occasions. However, barring Delhi, other states are yet to heed the request.

As per Petroleum Ministry estimates, state governments will earn an additional revenue of Rs 3,942.91 crore in a year at the present VAT and sales tax rates due to the recent hike in petrol and diesel prices.

States like Maharashtra would earn about Rs 550 crore, while Andhra Pradesh will get nearly Rs 410 crore. BJP-ruled Gujarat and Karnataka are estimated to gain Rs 285 crore and Rs 298 crore per annum, respectively.

Ruling out any revision in petroleum prices, Prasada said the oil marketing companies are working on the price fixation mechanism and a final decision is yet to be taken in this regard.

He also asked the UP government to keep CNG and PNG free from the VAT, so that prices of these products would remain at par with Delhi.

Indraprastha Gas Managing Director Rajesh Vedvyas later told reporters that the whole of Delhi and the National Capital Region, including Ghaziabad, will be covered by its CNG and piped natural gas (PNG) network in the next 5 years.

"The company plans to operationalise 22 CNG stations at an estimated cost of Rs 500 crore in Ghaziabad by March, 2011," he said.

Elaborating on the company's plans, Vedvyas said about 1,500 domestic consumers in Ghaziabad have already got piped gas connections in their kitchens and almost ten thousand more households will get it by March, 2011.

However, consumers will have to pay more for CNG in Ghaziabad, which has been priced at Rs 30.60 per kg, due to the higher tax rates in Uttar Pradesh. The price of PNG has been pegged at Rs 18.32 per standard cubic metre (SCM).

The roll-out of CNG and PNG networks in Ghaziabad was marred in controversy, as the Petroleum and Natural Gas Regulatory Board (PNGRB) had refused to grant authorisation to IGL to roll out its city gas distribution network in the area.

However, after a Delhi High Court ruling on January 21 this year which said that PNGRB is not empowered to issue authorisation for CGD projects under the present rules, the Petroleum Ministry issued authorisation to IGL for operationalising its network in Ghaziabad on June 30 this year.

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