Punjab govt raises fuel VAT, ends power subsidy to tackle fiscal crisis

The Punjab government increased VAT increase on petrol and diesel, raising the tax by 61 paise per litre for petrol and 92 paise per litre for diesel

The Punjab Cabinet on Thursday approved an increase in the value-added tax (VAT) on petrol and diesel, raising it by 61 paise per litre on petrol and 92 paise per litre on diesel.

This decision was made during a meeting of the council of ministers, chaired by Chief Minister Bhagwant Mann.

Following the Cabinet's deliberation, State Finance Minister Harpal Singh Cheema said that the hike is aimed at generating additional revenue for the state by adjusting the VAT on both fuels.

Cheema highlighted that this change is expected to significantly boost the state's revenue. Specifically, the government expects to collect an additional Rs 395 crore from the sale of diesel and Rs 150 crore from petrol annually.

The decision comes amid broader economic efforts by the Punjab government to strengthen its fiscal position. Cheema emphasised that the additional revenue generated from this VAT hike will contribute towards funding various development projects and addressing the state's financial needs.

The state government has also decided to revoke the Rs 3 per unit electricity subsidy for consumers with loads up to 7 KW. In another significant move, it has increased bus fares by 23 paise per km.

The Aam Aadmi Party (AAP) government aims to save Rs 1,500 crore annually by discontinuing the power subsidy, which was originally implemented by the previous Congress administration led by Charanjit Singh Channi.

This step comes as the state grapples with a financial crisis, with the power subsidy bill expected to exceed Rs 24,000 crore this year.

Additionally, increasing bus fares is expected to yield Rs 150 crore in annual revenue.