States agree to cut fuel tax, with rider

In a bid to reduce the burden of high global crude oil prices on the average citizen, a panel of state finance ministers Monday agreed to cut sales tax on petroleum fuels but asked the Centre to share half the burden.

"We will incur a loss of Rs 80 billion ($2 billion) by reducing the sale tax on fuels. The states cannot maintain the losses," said Asim Dasgupta, West Bengal finance minister and the chairman of the empowered group of finance ministers.

"We have asked the central government to share half of the losses," Dasgupta told reporters after the empowered group's panel met here. "We will soon meet Finance Minister P Chidambaram to discuss the issue."

The meeting, which was also scheduled to discuss the reduction of sales tax on aviation turbine fuel, however, deferred the matter for another day.

"We will seek further data from the civil aviation ministry. The issue will be discussed on June 23 when we meet in Srinagar."

The state-run oil marketing companies had hiked prices of aviation fuel by 18.5 percent May 31, pushing up its cost to Rs 69,227 per kilolitre in the national capital, against Rs 58,387.92 earlier.

This was followed by a 9.5-11 percent hike in base prices of petrol and diesel, which was allowed by the central government. As a result, petrol became dearer by Rs.5, diesel by Rs.3 and cooking gas by Rs 50 per 14-kg cylinder.