The price of diesel may go down by Rs 3 to Rs 5 a litre as the State Government is seriously considering the demand of petrol pump owners to slash the sales tax on the fuel.
The assurance to this effect by Finance Minister Jayant Patil prompted the petrol pump owners to end their five days-long strike in Maharashtra.
Though Patil who met a delegation of petrol pump owners was tightlipped, sources close to him said the sales tax could be brought down somewhere between 20 to 27 per cent from existing 34 per cent.
If this proposal is cleared by the State cabinet in its meeting on November 24, the diesel prices will be reduced by Rs 3 to 5 per litre.
Currently, the sales tax on diesel is 33 per cent (plus Re 1 cess) in Mumbai while for rest of Maharashtra it is 30 per cent (plus Re 1cess). For petrol the rate in Mumbai is 28 per cent (plus Re 1 cess) and 27 per cent (plus Re 1 cess) in the rest of the state. They also vary due to local octroi rates. The prices of diesel are Rs 40.30 in Mumbai.
Patil said the cabinet had the authority to decide the quantum of reduction in the sales tax on diesel. No changes are proposed in the taxes on petrol yet.
"I'm not authorised to declare anything as the Cabinet would take a final decision on Friday," Patil told reporters. "The talks were very satisfactory and the dealers have decided to call off the strike," he added.
If the sales tax on diesel is slashed considerably, consumers are likely to get some benefit. The tariff of public transport buses may be reduced marginally. Also, there will be pressure on traders to cut the prices of vegetables and pulses and other items of daily needs which are transported to the city from various parts of the state.
Wednesday's talks between government and petrol dealers were limited to tax on diesel as the neighbouring states where sales tax is much less were eating Maharashtra's sales volume of 10 lakh kiloliters per annum.
This has been directly affecting the sales of petrol pumps, especially in areas bordering other states. Maharashtra has one of the highest taxation rates in the country and as a result the pump owners in the inter-state border areas have suffered a lot.
Patil, however, said the state's effort would not be sufficient. "The Union Government must also bring down the fuel prices as international rates have fallen to $55 from $75 per barrel."
The dealers who had gone on strike twice before this year gave enough hints that they would not compromise on minor cut in the taxes.
The reduction of three of four per cent won't make any difference, said Ashok Dikshit, president of the Federation of All Maharashtra Petrol Dealers Association.
"We asked the government to bring the rates down to 20 per cent which is less than any neighbouring state."
Patil said the Finance Department would work out an amicable formula considering the impact of reduced rates on the state's revenue.
"We're not rigid. We'll assure that the government doesn't lose revenue," said President of Mumbai Petrol Pump Dealers' Association Ravi Shinde.
When asked they didn't force the government to lower sales tax on petrol, Dikshit said the petrol sale was a local business. "The sales volume of petrol can be retained. But it's very difficult to do the same to diesel as transporters buy diesel in other states before entering Maharashtra."