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 Rs 0.50 on diesel after this week's Rs 5 and Rs 3 hike in the two auto fuel prices.
Petroleum Minister Murli Deroa on Thursday wrote to chief ministers of 30 states and union territories asking them to "at least forego the incremental tax" revenues so as to ease the burden of spike in international oil prices on common consumers.
"It is the duty of both central and state governments to provide maximum relief to the consumers... (while) the central government is contributing over Rs 120,000 crore (Rs 1200 billion), 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. Foregoing the incremental sales tax revenues will not in any way impact the state earnings.
Andhra Pradesh, which has the highest sales tax of 33 and 22.25 per cent on petrol and diesel, is earning Rs 1.38 and Rs 0.59 a litre extra. In Mumbai that has a sales tax of 30.64 and 28 per cent, incremental revenue will be Rs 1.17 and Rs 0.75 respectively.
Akali Dal-BJP ruled Punjab levies a 31.68 per cent sales tax on petrol and will earn Rs 1.16 per litre more sales tax.
So far, West Bengal, Bihar and Tamil Nadu have cut sales tax on the two fuel to minimise the June 4 hike. The BJP-ruled Madhya Pradesh has gained Rs 1.21 additional revenues on every litre of petrol sold in the state and Rs 0.67 per litre of diesel, while Rajashtan with 29.36 per cent sales tax on petrol and 21.82 per cent on diesel is getting Rs 1.16 and Rs 0.53 per litre incremental revenues on the two.
Delhi, which is subsidising 80 per cent of the Rs 50 per cylinder hike in LPG prices, is earning Rs 0.83 per litre additional sales tax revenue on petrol and Rs 0.33 a litre on diesel.
"The country imports over three-fourth of the total crude processed and with crude constituting about 90 per cent of the product cost, adjusting the retail selling prices of sensitive petroleum products has become imperative," Deora wrote.
"If the present international oil prices continue without any domestic retail price adjustments, our PSU marketing companies would have incurred a revenue loss of Rs 245,300 crore (Rs 2453 billion) during the current year, which is simply far too heavy and would have placed them in a crisis," he added.
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.
Post-hike, BSP-ruled Uttar Pradesh is getting Rs 1.08 per litre incremental revenue on petrol and Rs 0.56 a litre on diesel.
Prime Minister Manmohan Singh has also urged states to cut sales tax. "The Central government, oil companies and consumers are bearing a part of this immense burden. It is, therefore, incumbent on state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies."
The cut in sales tax by West Bengal has seen its revenues from petrol fall by Rs 1.03 and diesel by Rs 0.90 per litre from what it was earning in pre-hike days.
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