The Shivraj Singh Chouhan government on Tuesday raised value added tax (VAT) on petrol and diesel by 4%, offsetting the Rs 2 per litre cut in prices by oil companies on Monday night.
But what came as a total shock to the opposition and social organisations is the decision of the government to reduce VAT on cigarettes from 27% to 13%, a move which contradicted the central government’s plans to curb sale of tobacco products in the country.
The opposition Congress described the move to make cigarettes cheaper “anti-people” while the MP Voluntary Health Association said the decision should have been the “reverse”.
“VAT on fuel should have been decreased and increased on cigarettes, which would have benefitted society both ways,” said Mukesh Sinha, secretary of the association.
Neither finance minister Jayant Malaiya nor any officer of the department agreed to speak on the cabinet’s decision to reduce VAT on cigarettes.
However, sources in the government said that some ministers including Babulal Gaur, Bhupendra Singh and Gauri Shankar Shejwar opposed Chouhan’s move in the cabinet meeting.
They were also of the view that the benefit of fuel price cut should be passed to the public while some referred to its implications on the upcoming panchayat elections.
The two moves were the chief minister’s first major decisions after completing a year in office in the third term.
Following the hike, VAT on petrol in Madhya Pradesh would go up to 31% and on diesel 27% but retail prices would remain “more or less the same” as before the price cut, sources said.
On Monday, oil companies had slashed petrol price by Rs 2.14 and diesel by Rs 2.21 in Bhopal.
After the 4% increase in VAT, petrol in Indore and Bhopal would be dearer by about Rs 2.05 per litre and diesel by Rs 1.80 per litre — a change of .09 paise in petrol and .41 paise in diesel.
Petroleum dealers, however, said that final prices could be slightly different after the government notification is issued.
The sources said that the government had estimated a loss of more than Rs 550 crores due to slash in prices of fuel.
“The government now expects to add around Rs 800 crores to its kitty through the increase on VAT in petrol and diesel,” a source said.