Fuel price cut:Pb, Haryana see revenue loss of Rs 300cr per yr

The latest cut in fuel prices in the wake of falling global oil prices is likely to result into a combined revenue loss of around Rs 300 crore per annum for Punjab and Haryana.
Despite resorting to raising tax on fuel last month in order to compensate for loss of revenue on account of falling fuel prices, fresh reduction in petrol and diesel prices is further expected to hit revenue mobilisation of both Punjab and Haryana.
Petrol and diesel prices were cut by Rs 2 per litre each with international oil prices slumping to five-year lows.
It was the eighth straight reduction in petrol prices since August and fourth in diesel since October. The new prices were effective from December 15 midnight.

"There is going to be a revenue loss of about Rs 100-150 crore due to latest reduction in fuel prices," a senior official of Punjab Excise and Taxation department told PTI here.
Similarly, Haryana also fears revenue loss of about Rs 150 crore on account of reduction in petrol and diesel prices.

"It is expected that there will be an impact of Rs 13 crore of revenue per month from both petrol and diesel due to cut in recent fuel prices," said an official of Haryana Excise and Taxation department here.
Revenue from petroleum products constitute over 20 per cent of both states' collections from value added tax (VAT). VAT is a major source of revenue for any state to meet its expenditure.

Punjab and Haryana have projected total VAT collections to the tune of Rs 17,760 crore and Rs 19,930 crore, respectively, by end of current fiscal.
"There is no doubt that reduction in fuel prices will impact state's revenue mobilization," Punjab Finance Minister Parminder Singh Dhindsa said today.
With states levy tax on petroleum items as per 'ad valorem' method, any increase or decrease in prices of fuel cause affect in tax mobilisation to the state kitty. As per 'ad valorem' method, the tax is charged as per value of goods or services
However, both states do not have any plan as of now to frame a proposal to further raise VAT on petroleum products to make up the revenue loss on account of reduction in petrol and diesel rates.

Notably, Punjab government had jacked up VAT on diesel twice since October in order to shore up its revenue.
The SAD-BJP led government in Punjab had raised VAT on diesel by 1.5 per cent to 11.25 per cent with effect from November 15. Earlier, Punjab government had raised VAT on diesel by one per cent to 9.75 per cent with effect from October 1.
Punjab also levies 10 per cent surcharge on VAT rates.
Following the footsteps of Punjab, the neighbouring Haryana government had also announced to raise VAT on diesel from 9.24 per cent to 12.07 per cent on November 25, which would yield additional revenue of Rs 737 crore to the state exchequer.