Revenue-starved Punjab govt reduces subsidy on power tariff, increases VAT on fuels

NEW DELHI: In a move to trim the debt burden and shore up state coffers, the Punjab government on Thursday decided to increase the value-added tax (VAT) on petrol and diesel.

The CM Bhagwant Mann-led government has also slashed the subsidised power tariff for domestic consumers by Rs 3 that the previous Congress regime had rolled out.

The state has increased the VAT on petrol by 61 paise per litre and diesel by 92 paise per litre.

Currently, the retail price of petrol in Mohali stands at Rs 97.01 per litre and diesel is priced at Rs 87.21 -- which is comparatively higher than prices in Chandigarh.

Petrol price in the Union territory is Rs 94.24, whereas diesel costs 82.40 per litre.

In the council of ministers meeting chaired by CM Bhagwant Mann, the decision was also taken to cut down electricity subsidy for domestic consumers by Rs 3.

Apart from fuels, the Mann government has junked the previous Channi government's decision to reduce power tariff by Rs 3 per unit for consumers as the current dispensation is hopeful that the move will help buff up the exchequer with extra Rs 1,500-1,800 crore per annum.

Punjab finance minister Harpal Singh Cheema, however, assured that 300 units of free electricity per month for the domestic category will continue.

Addressing the media after the cabinet meeting, Cheema said the previous government had reduced the power rates by Rs 3 per unit for domestic consumers, having up to 7 kW load.

"We withdrew that decision today," he said, according to news agency PTI.

In November 2021, the then Charanjit Singh Channi government had slashed the power tariff by Rs 3 per unit for domestic consumers, having a connected load of up to 7 kW (kilowatt).

After the decisions were made public, the fuel pump owners expressed strong disapproval over the move, saying it would hamper their business significantly.

Criticising the state government's decision, Petrol Pump Dealers' Association, Punjab, spokesperson Monty Sehgal told PTI with the hike in VAT on fuel, the sales of petrol and diesel located in border districts "will be impacted as their business will shift to neighbouring states where the fuel is less expensive".

Mohali-based fuel pump owner Ashwinder Singh Mongia said this move will encourage more "smuggling" of fuel which will ultimately lead to a reduction in tax revenue to the state.

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