The Hindu : New Delhi News : Second thoughts on diesel price hike

Online edition of India's National Newspaper
Wednesday, Mar 30, 2005

New Delhi

New Delhi

Second thoughts on diesel price hike

By Our Staff Reporter

NEW DELHI, MARCH 29. As pressure mounts on the Sheila Dikshit Government from the diesel lobby not to go ahead with the proposed increase in tax on diesel from 12 per cent to 20 per cent under the new Value Added Tax (VAT) regime coming in from April 1, the Government is also having second thoughts on effecting the Rs. 1.80 increase in diesel price from April 1.

Similarly, the Government has also come under intense pressure from the medical fraternity to bring down duty on surgical equipment from 12.5 per cent to 4 per cent as this hike would make medical treatment as well as surgeries, including bypass heart surgery, expensive.

The Petrol Pump Dealers' Association has threatened to go on a one-day strike on Wednesday and keep their pumps closed after 6 p.m. thereafter to protest against the Delhi Government' move to raise tax on diesel from 12 per cent to 20 per cent. The Government had last year also raised the sales tax on diesel from 12 per cent to 20 per cent, but had rolled back the decision after intense lobbying by petrol pump owners. A high-level meeting was today convened under the leadership of the Chief Minister, Sheila Dikshit, to review the situation and assess the impact of the hike.

Although officials assert that no roll back in the tax on diesel was possible this time round keeping in mind the experimental stage of the new VAT system, the political leadership might just not go by their opinion and succumb to pressure from the petrol pump lobby who were successful in convincing Ms. Dikshit last year not to go ahead with the hike as a result of which Delhi lost nearly Rs. 120 crore as revenue. Officials said if the hike does not take place again this year, this would result in a loss of Rs. 150 crores and badly affect the collection target. The Petrol Pump Dealers' Association has argued that Haryana has still not hiked the tax on diesel and it remains at 12 per cent. The Uttar Pradesh Government is charging 22 per cent sales tax on diesel, but has still not joined the VAT bandwagon and the BJP-led Rajasthan Government has refused to implement VAT. The lack of uniformity across States, they feel, will badly affect their earnings and therefore they have decided to close their shutters for a day after 6 p.m. onwards on Wednesday as a mark of protest. All the trucks and other heavy vehicles that require diesel would have to go to Noida or areas in Haryana to fill their tanks.

Officials pointed out that apart from diesel, the Government would lose another Rs. 100 crore by the re-categorisation of drugs and medicines from the 8 per cent to 4 per cent under VAT. Similarly, bringing paper and its related products from the 8 per cent to the 4 per cent slab would further reduce revenue by another Rs. 30 crores and lowering of the rate of tax on food served in five-star hotels from 20 per cent to 12.5 per cent would also affect revenue earnings. The Government cannot afford such a situation as a new law is in its implementation stage and any kind of unnecessary tampering would only affect the revenue earnings as well as the targets. The Government has already withheld its consent for implementation of the 2 per cent cess that was to be imposed on the purchase of diesel vehicles in the Capital. In a related development, the Delhi Government today notified the rules for implementation of the VAT regime from April 1.

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