In a major development, AAP led Delhi Government increased the fuel prices in the national capital. The petrol price was hiked by Rs 1.67 a litre on Tuesday and diesel by a steep Rs 7.10 per litre after the Delhi Government increased local sales tax or value-added tax (VAT) on the two fuels. In comparison to the percentage increase, the Delhi Government raised VAT on petrol to 30 percent from 27 percent while in the case of diesel, VAT has gone upto 30 percent from 16.75 percent.
The hike was expected after its neighbour Haryana had also increased the VAT on diesel and petrol prices a few days back. For diesel, the current rate is almost double in comparison to earlier prices. If we look at the revenues, the Delhi Government earned Rs 3,500 crore in April 2019, but last month is was only able gather Rs 300 crore. This might have forced the Arvind Kejriwal helmed Delhi Government to increase the rates on fuel.
Diesel is now more expensive in Delhi compared to its neighbouring states, Uttar Pradesh and Haryana. Delhi Government had put restrictions on its people's movement due to the COVID-19 outbreak. With the movement of normal vehicular traffic ceased and only essential services allowed, Delhi economic resources took a severe hit. With money going towards various social initiatives designed to help the people affected by Coronavirus, the Delhi Government had to take drastic measures. Increasing the tax on fuel would further add money to the government coffers as the restrictions ease. Petrol and diesel price hike is one of the surest ways to shore up the declining revenues.
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The step to increase fuel prices by the Government comes close on heels of other Indian state increasing the prices on fuels and other commodities. In April, at least 3 states in India increased fuel prices by as much as Rs 6 per litre to generate funds to tide over the Coronavirus Pandemic. The Nagaland Government announced cess of Rs 6 per litre on petrol and Rs 5 per litre on diesel. Assam and Meghalaya also announced hikes on petrol and diesel prices.
We can expect other Indian states to follow suit once lockdown ends.