With diesel prices expected to increase further, Delhi government may consider giving relief to the common man by reducing valued added tax (VAT) on it. Senior officials said the government has decided to closely monitor the changes in diesel prices and its impact on essential commodities in the next couple of weeks.

"Nothing has been decided as yet. We will observe the situation for next few days," a senior Delhi government official said.

After the central government increased the diesel prices by Rs 3 a litre and the price of LPG cylinder by Rs 50 in June, the Delhi government stepped forward and cut down the price of diesel by 37paise a litre and gave Rs 40 per cylinder relief to the BPL and Antodaya families.

Sources said the government would assess the impact of diesel price hike on the common man and would explore the possibility of giving further relief. The issue was even discussed in the Cabinet meeting on Monday, however, said officials, no concrete decision could be taken due to "complexities" involved in the issue.

Interestingly, the petrol dealers in the Capital have been pursuing the Delhi government to reduce VAT on diesel for a long time now. Petrol dealers said a cut down on VAT, which stands at 12.5% now, would not only give relief to the common man but would also help petrol dealers get more business.

"VAT on diesel in the neighbouring state of Haryana is 8.8% and it costs Rs 39.77 for a litre. A large number of commercial vehicles and private cars buy diesel from Haryana. Our business has come down to almost half in the past couple of years. If we get our business back, Delhi government will also earn more revenue," said a petrol pump owner.

Refusing to deliberate on the issue, Delhi chief minister Sheila Dikshit indicated that the matter was under consideration.

"Let us see what happens in the next one-two months," Dikshit said after the Cabinet meeting.