Decision to reduce VAT of petrol, diesel in Rajasthan a bold move by Gehlot government

The Ashok Gehlot government’s decision to reduce two per cent VAT on both petrol and diesel has resulted in the reduction of oil prices in the state. The price of petrol was down by Rs 1.34 and diesel by Rs 1.31.

This was a bold decision by the Gehlot government at a time when Covid has impacted revenue collection in the state.

The reduction in VAT from 38 per cent to 36 per cent on petrol and from 28 per cent to 26 per cent is expected to put a burden of Rs 900 crore on the exchequer.

Chief Minister Gehlot has been very critical of the Union government’s policy on oil prices and he has been pointing out that despite a drop in international crude oil prices, fuel prices in the country have kept on increasing. This came as a heavy burden on the consumer during the Covid crisis and put pressure on not only the common man but also on goods and services.

Gehlot said that the Centre has been continuously raising additional excise duty on petrol and diesel which has gone up to Rs 18 from Rs 8 per litre. He said the special excise duty on petrol has also gone up from Rs 7 to Rs 12 while the same for diesel has risen from zero to Rs 9.

Gehlot said the Centre is collecting taxes of Rs 32.98 on petrol and Rs 31.83 on diesel. He said the basic excise duty is paid to the states as part of the Centre’s divisible pool of taxes and the rates have been coming down steadily from Rs 9.48 to Rs 2.98 per litre of petrol and from Rs 11.33 to Rs 4.83 of diesel due to which all the states are suffering huge losses. Gehlot has urged the Centre to bring down its taxes so that the general public and businesses get relief.

Rajasthan, like Gujarat, Andhra Pradesh, Assam and Maharashtra, is an oil and gas producing state. It produces 24 percent of the country’s oil and helps in reducing the import burden. But there is no plan by the Centre to give relief to such states that produce oil.

Meanwhile, gifted with massive oil and gas reserves, Rajasthan is now aiming to become a prosperous state through its proposed refinery and the proposed petroleum, chemicals and petrochemicals investment region (PCPIR).

Rajasthan’s hope is on a new Rs 44,000 crore oil refinery to be set up at Pachpadra village in the border district of Barmer, a dream project of the Congress government that suffered several hiccups but has started rolling now. It will be a joint venture of the Hindustan Petroleum Corporation Ltd (HPCL) and government of Rajasthan.

The new refinery and petroleum complex will have a total processing capacity of nine million metric tonnes per annum (MMtpa). It will be used for the production of BS-VI grade motor spirit and diesel fuel, as well as other products including ethylene and propylene derivatives. The derivatives will be used as feedstock in industries, such as textiles, packaging and petroleum.

It is expected that with the derivatives available, it would lead to the setting up of more industrial units and thousands of job opportunities.

The project is the first of its kind in Rajasthan and is being developed by a joint venture (JV) between Hindustan Petroleum Corporation Limited (HPCL, 74%) and the Government of Rajasthan (26%) known as HPCL Rajasthan Refinery Limited (HRRL).

The Gehlot government expects Rs 15,000 investment in the proposed PCPIR and this expectation is based on the response of nearly 100 companies that took part in the virtual meeting organized by the state government in association with the CII. The response of foreign companies was overwhelming. Saudi Arabia, the UAE, Oman, Germany, the UK, the USA, Switzerland, Netherland, France, Japan, Singapore, Taiwan, Brazil, Bahrain, Jordan, South Korea and South Africa participated in the virtual meeting.

Industries minister Parsadi Lal Meena said that the state government’s investment wing, the Rajasthan Industrial Investment Corporation (RIICO) will develop PCPIR near the refinery plant. He said the bye-products from the refinery complex like polyethylene, polypropylene, butadiene, benzene and toluene will be available for the downstream industries. RICCO will soon start allotting plots for this PCPIR and in all 93 such plots will be allotted in the first phase. These plots are spread in 243 hectares near Pachpadra.

The Chairman of the Hindustan Petroleum (HPCL), Mukesh Kumar, was among the participants as the head of collaborating company in the refinery. He said that the foresight of the Rajasthan government should be appreciated as much before the production in the refinery starts, it has thought of building the infrastructure for PCPIR. He said the operation of the refinery would commence next year after considerable delay because of COVID.

Chairman of RIICO and also the principal secretary to the Chief Minister Kuldeep Ranka and the managing director of RICCO, Ashutosh Pednekar, highlighted the advantages of the PCPIR and its huge growth potential.