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'State CMs must cut sales tax on petro products'

A day after the Centre's hike, Assam, Bihar, Tamil Nadu, M'rashtra and Delhi have cut taxes on petroleum products in a bid to retain consumers, reports G Choudhury.

business Updated: Jun 06, 2008 02:06 IST
Gaurav Choudhury

A day after the central government announced a steep hike in fuel prices, political parties on Thursday stepped in to soften the blow and asked states they rule to cut local taxes on petroleum products.

Some states responded instantly, others said they would decide soon. Assam, Bihar, Tamil Nadu, Maharashtra and Delhi cut taxes on some of the products in a bid to cushion consumers. Andhra Pradesh, Karnataka, Kerala, Haryana and Madhya Pradesh said they would soon announce cuts in local taxes. West Bengal moved to cut its taxes hours after the Centre on Wednesday announced the steepest-ever hike in prices of petrol, diesel and LPG.

The reaction from the states came after the heads of the country’s two largest parties — Congress chief Sonia Gandhi and BJP chief Rajnath Singh — asked chief ministers of states ruled by their respective parties to reduce sales taxes to bring some relief to the common man.

The directives from Sonia and Rajnath were an endorsement of PM Manmohan Singh’s appeal to state governments to reduce local levies, which make up as much as 17 per cent of the cost of petrol to consumers and 12 percent for diesel.

“We have to give some relief to the people,” said Maharashtra Finance Minister Jayant Patil, as he announced a 2 per cent cut in sales tax on petrol and diesel. “Though we are facing a (revenue) loss of Rs 620 crore, we are ready to let go off it.” The Centre on Wednesday had increased petrol price by Rs 5 per litre and diesel by Rs 3 per litre, but in states that cut sales taxes on Thursday the actual hike for consumers would be lesser by at least Re 1 for petrol and 50 paise for diesel.

This is the first time states have responded so swiftly to the Centre’s appeal, underscoring the political fallout of high prices in an election year.