Petroleum Minister Murli Deora on Friday praised the Delhi government for reducing the value added tax on diesel, which will bring down its price by Rs 2.70 per litre, and called on other states to follow its example.
"This would provide relief to the consumers from the additional sales tax levied as a result of recent price hike due to the ad valorem nature of the state taxes and in fact bring down diesel prices to a level lower than the prices prevailing before the increase effected June 25, 2010," he said, according to an official press release.
Deora was referring to the price increase in diesel by Rs 2 per litre last month. At that time, he had been asking state government to reduce the sales tax on petroleum products.
The Delhi government on Friday announced reduction in the value added tax on diesel from 20 per cent to 12.5 per cent effective July 20.
He gave an example of Bihar which levies 12.5 per cent tax on kerosene, where even after recent price increase, oil marketing companies would incur under-recovery of more than Rs 16,000 crore.