Petrol pumps in Maharashtra to shut from 26 August over local tax issue

Petrol dealers across Maharashtra will go on an indefinite strike from 26 August, as part of a statewide bandh called by the Federation of All Maharashtra Petrol Dealers' Association, seeking uniformity in taxes on petrol and diesel across the state and reduction in local body tax to 0.1 per cent.

The dealers contend that reduction in LBT and VAT rates would reduce petrol prices by Rs5-6 per litre. They allege that despite negotiations with the government for over six months, no action has yet been taken on the proposal, and hence they have decided to go on strike from 26 August.

The Dealers' Federation chairman Uday Lod said the decision to go on strike is in the interest of consumers as well. The dealers also claim that there would be no adverse effect to the government revenue from such reduction in taxes.

According to the petrol dealers, if the VAT on diesel in Maharashtra is reduced by 3 per cent, sales would increase by up to 25 per cent, thus adding Rs607 crore to the government revenue. Moreover, diesel prices would fall by Rs2, benefiting the consumer.

Municipal corporations in Maharashtra levy 0.5 per cent LBT rate on gold sales because of its high demand. Against this, given that the demand for petrol and diesel is so high, a 2-4 per cent LBT rate seems unfair to the consumer, according to dealers. If instead, Rs0.30 of LBT is charged per litre for petrol and diesel, the demand will rise by 200 per cent, the state government will earn revenue and prices will fall by Rs4-5 per litre.

The difference in tax rates within and outside the city has resulted in lower prices at petrol pumps outside the city and affected the business of filling stations within the municipal limits. The situation is similar in all municipal corporations across the state. Moreover, the dealers have to pay 1.25 per cent state specific cost to the state government. The petrol and diesel prices increase by almost Rs4 a litre due to LBT and state specific cost.

The dealers are also demanding a single LBT/VAT rate for the entire state of Maharashtra.

Petrol dealers had organised a token strike on 11 August to bring the government's attention to the issue. However the government failed to initiate negotiations.

Reduction in petrol and diesel prices would be a politically beneficial step for the government given that assembly elections are due in Maharashtra.