Falling Rupee To Give Rs 22,700 Crore Tax Gain To States

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In a masterstroke and timely decision, Chandrababu Naidu has cut down the excise duty of AP state government on the fuel prices.

Thanks to the fall in the dollar-rupee and rise in petrol and diesel prices, states will garner an additional Rs 22,700 crore in revenue over and above budget estimates, according to a State Bank of India (SBI) research note. Petrol prices on Tuesday touched a scorching Rs 90.11 in Maharashtra's Parbhani while diesel prices also increased from Rs 77.92 to Rs 78.06, Parbhani District Petrol Dealers Association (PDPDA) President Sanjay Deshmukh said.

The prices of petrol and diesel are under Rs 70 per litre in Port Blair, the capital of the Andaman and Nicobar Islands.

This windfall gain will have a positive impact on state finances, which might push down the states' fiscal deficit by 15-20 bps (100 bps or basis points equal to 1 per cent) provided other things remain unchanged.

A petitioner had challenged the daily rise in fuel rates and sought a direction to the Centre to fix a fair price for petrol and diesel by treating them as essential commodities. "The petitioner has reasons to submit that enhanced fuel prices (petrol and diesel) are being demanded/charged as per political wish, need and necessities", the petition alleged.

Mumbai has the highest Value-Added Tax of 39.12 per cent on petrol, while Telangana levies the highest Value-Added Tax of 26 per cent on diesel.

"However, this will result in a revenue loss of States of around ₹ 12,000 crore (net of ₹34,627 crore loss and ₹22,700 crore gain from oil bonanza)", the report added.

The move to make fuel cheaper will cost the Andhra Pradesh exchequer up to Rs 1,120 crore.

A Bench of Chief Justice Rajendra Menon and Justice V Kameswar Rao said they can not issue any direction to the Central Government to fix a "fair price" of petrol and diesel as it is a policy matter which involved "larger economic issues".

In Thane, petrol retailed at Rs 88.29 and diesel at Rs 77.49.

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