Coming amid slowing economy and poor fiscal health, the deregulation of diesel prices is set to bring the Punjab government financial and political trouble.
With the Rs 3.37-pe-litre reduction in the price of diesel, the Shiromani Akali Dal (SAD) government will lose Rs 125 crore in value-added tax, when the opposition Congress has questioned its remaining silent on linking the cost with market rate.
The daily sale of 4-lakh kilolitre diesel in the state gives Punjab Rs 1,800 crore a year in VAT.
Recently, it has increased VAT by 0.5% to raise about Rs 100 crore, which the price decline has undone.
The excise and taxation department foresees an annual loss of between Rs 125 and 150 crore (about 31 paise per litre).
Struggling to get funds from the central government, the state economy is going to go further in red. It will also hit the SAD politically.
It has always opposed the lowering of subsidy on diesel and the de-regulation of its price from the government control, so the step has given the Congress enough ammunition to criticise it.
“The reduced diesel price might appear a respite for now but it will be bad for farmer in the long run,” said Patiala (rural) Congress legislator Brahm Mohindra. “The linking with the market rate will increase the prices of diesel in the coming days,” said Sukhjinder Randhawa, Congress legislator from Dera Baba Nanak. In separate statements, Mohindra and Randhawa questioned the silence of the SAD on price de-regulation.
“It (deregulation) is going to spell doom in the Punjab framings sector, which consumes a lot of diesel.
When the price increases globally or the value of rupee declines against dollar, the cost will go up in Punjab. The SAD should break its silence (over the decision) and criticise the central government (run by its ally),” said Randhawa.
State Congress spokesperson Sukhpal Singh Khaira said the diesel and gas pricing formula of the Centre was “payback to the Ambanis and the Adanis for their funding the BJP election campaign”.