Mumbai: The centre will reduce prices of petrol and diesel by about Re1 per litre and Rs0.50, respectively, if states agree to forego the incremental sales tax revenues the may earn from the fuel price hike.

States like Andhra Pradesh, Kerala, Karnataka, Punjab and Uttar Pradesh stand to gain over a rupee in sales tax on every litre of petrol sold and over Rs0.50 on diesel following the Rs5 hike in the price of petrol and the Rs3 hike in the price of diesel.
 
Andhra Pradesh, which has the highest sales tax of 33 and 22.25 per cent on petrol and diesel, will earn Rs1.38 and Rs0.59 a litre extra. In Mumbai that has a sales tax of 30.64 and 28 per cent, incremental revenue will be Rs1.17 and Rs0.75 respectively.

Punjab levies a 31.68 per cent sales tax on petrol and will earn Rs1.16 per litre more sales tax.

Madhya Pradesh has gained Rs1.21 additional revenue on every litre of petrol sold in the state and Rs0.67 per litre of diesel, while Rajasthan with 29.36 per cent sales tax on petrol and 21.82 per cent on diesel is getting Rs1.16 and Rs0.53 per litre incremental revenues on the two.

Karnataka with a 28 per cent sales tax on petrol and 20 per cent on diesel is earning Rs 1.44 and Rs 0.69 per litre of additional revenue from the two fuels.

Uttar Pradesh is getting Rs1.08 per litre incremental revenue on petrol and Rs0.56 a litre on diesel.

Delhi, which is subsidising 80 per cent of the Rs50 per cylinder hike in LPG prices, is earning Rs0.83 per litre additional sales tax revenue on petrol and Rs0.33 a litre on diesel.

In letters to chief ministers of all 30 states. petroleum minister Murli Deroa has asked them to "at least forego the incremental tax" revenues so as to ease the burden of high oil prices on the common man.

"It is the duty of both central and state governments to provide maximum relief to the consumers... (while) the central government is contributing over Rs120,000 crore, it is also expected that the state governments will not lag behind in helping the consumers in sharing their burden," he wrote.

The centre has cut customs and excise duties on crude oil and products to protect consumers, he said, adding, foregoing the incremental sales tax revenues will leave states' earnings unaffected.

Prime Minister Manmohan Singh has also urged states to cut sales tax.

So far, West Bengal, Bihar, Kerala, Tamil Nadu and Jharkhand have cut sales tax on the two fuels after the June 4 price hike.