Staring at Rs 26,000 cr revenue loss, Gujarat hikes fuel prices by Rs 2/ltr

Price hike estimated to give Rs 15,000 crore boost to state finances

Facing an estimated Rs 26,000 crore revenue loss in the current fiscal due to the Covid-led lockdown, the Gujarat government on Monday announced a Rs 2 per litre hike in petrol and diesel prices each. 

Announcing the hike, deputy chief minister and finance minister Nitin Patel said that the new rates will be made effective from midnight and was necessary to meet the earning gap the state exchequer had to bear due to lockdown.

"The expected revenue loss for the current fiscal is about Rs 24,500-26,000 crore due to Covid-19 pandemic. We had no option but to hike the prices to compensate this revenue loss," Patel told mediapersons on Monday. 

The price hike is estimated to garner an additional revenue of Rs 15,000 crore, providing a fillip to the stressed state finances. 

According to Patel, there has been a "massive drop" in tax revenue of Gujarat including a dip in the state's share in Goods and Services Tax (GST), along with stamp duties, VAT earnings from fuel consumption amidst the over two months long lockdown bringing almost all economic acitivities to a standstill.

Gujarat expects a shortfall of about Rs 10,000 crore in its share of GST income, which was earlier estimated at Rs 5,550 crore. 

"There is also going to be an impact on the earnings through vehicle tax and road tax. And the after-effect of the lockdown is likely to remain for a longer duration because businesses have not returned to normal condition even after unlock was implemented," said Patel.

However, despite a Rs 2 per litre hike, fuel rates in Gujarat are still some of the lowest in the country, said Patel. 

After the hike, new petrol rates in Gujarat stand at Rs 73.88 a litre, as against Rs 83.82 per litre in Madhya Pradesh, Rs 82.60 per litre in Maharashtra and Rs 83.14 per litre in Rajasthan.