Petrol price to drop ₹8.6 from today after tax cut

The Delhi government on Wednesday reduced value added tax (VAT) on petrol, bringing down the price of the fuel in the city by ₹8.56 per litre, a move chief minister Arvind Kejriwal said will bring relief from inflation to the people of the national capital.

The Aam Aadmi Party (AAP) government slashed VAT on petrol from 30% to 19.40%. While the price of diesel in Delhi was already lower than other cities in the national capital region (NCR), Wednesday’s decision made petrol also cheaper than in Noida and Gurugram.

“We have made petrol very cheap in Delhi from today. VAT rates have been reduced from 30% to 19.4%. Petrol and diesel will be cheaper in Delhi as compared to other cities of NCR. I hope this step will bring huge relief to the people of Delhi from inflation,” Kejriwal announced on Twitter.

Fuel prices remained unchanged for the 28th day on Wednesday across the country. The cost of petrol in Delhi on Wednesday was ₹103.97 a litre, while diesel was being sold at ₹86.67 per litre. The cost of petrol in Noida was ₹95.51 a litre and ₹95.90 a litre in Gurugram. In recent days, Delhi was losing customers to filling stations in satellite cities in neighbouring states. After the VAT cut on Wednesday, the price of petrol will drop to ₹95.41 a litre in Delhi from Thursday.

The Centre cut excise duty on petrol by ₹5 per litre and ₹10 per litre on diesel to bring down the retail prices across the country on the eve of Diwali last month. Following the Centre’s move, several states and Union Territories, especially those governed by the Bharatiya Janata Party (BJP) and allies, followed suit.

The petrol price in Delhi was higher as compared to the NCR cities in Uttar Pradesh and Haryana, where the state governments announced a VAT cut following the Centre’s decision to reduce the excise duty.

The decision to reduce VAT was approved at a Cabinet meeting chaired by Kejriwal.

A notification to implement the decision was issued in the evening, with the new price coming into effect from Thursday.

At the meeting, Kejriwal expressed deep concern for the people of Delhi in the current situation and was of the view that the government needs to reduce prices at this juncture to support the public, a statement by the Delhi government said.

“This is a big cut in the rate of VAT on petrol in Delhi. The decision was taken taking into account the inflation scenario across the country. The chief minister held an in-depth discussion with the Cabinet on how the general public of Delhi can be provided relief from the back-breaking inflation… Hence, it was decided to give relief to the people of Delhi through reduction in petrol prices,” the Delhi government statement said.

The Delhi Petrol Dealers Association (DPDA), which has been demanding a VAT reduction on fuel prices, said the move would save them from a potential “financial doom” and also prevent illegal smuggling of petrol and diesel. “Even though in Delhi, by virtue of having its borders within a radius of 15km, people in dire straits had to travel to the neighbouring cities such as Noida and Gurugram to buy petrol and save money, especially in these distressing times of Covid-19. This was also giving impetus to scrupulous entities to smuggle petrol and diesel, furthering the loss to the exchequer,” said Anurag Narain, president of DPDA, in a letter to Kejriwal on Wednesday.

Delhi’s diesel prices are already the cheapest in NCR at ₹86.67 per litre, while the rates of diesel in Noida and Gurugram are ₹87.01 and ₹87.11 per litre, respectively.

The Delhi government marginally increased VAT on petrol last year amid the Covid-19 pandemic. Back then, VAT on petrol was 27% in Delhi, which was increased to 30% last year. With Wednesday’s decision, VAT on petrol in Delhi will be slashed by 10.58 percentage points, making it 19.42%.

Leader of opposition in the Delhi assembly Ramvir Singh Bidhuri urged Kejriwal to also reduce VAT on diesel, considering the welfare of farmers and public transport operators. “It is a fairly late step taken by the Delhi government. VAT on diesel is highest in Delhi compared to other states which proves that Kejriwal is always anti-farmer because transporters and farmers use only diesel to run their trucks and tractors. Reducing VAT rates in diesel would also reduce the prices of vegetables and everyday items, which would directly benefit the public,” said Bidhuri.