New Delhi, July 30: Diesel price in the national capital was on Thursday cut by Rs 8.36 per liter after the state government rolled back a VAT hike that had made the fuel uncompetitive in comparison to adjoining cities such as Gurgaon and Noida.
Delhi Chief Minister Arvind Kejriwal announced a reduction in VAT or sales tax on diesel from 30 percent to 16.75 percent, saying the move will help the city's economy recover from the impact of coronavirus pandemic.
The reduction in the value-added tax (VAT) rate, which would be effective from midnight, will help bring down the price of diesel to Rs 73.64 per liter, he said.
The Delhi government had on May 5 hiked VAT on petrol to 30 percent from 27 percent and on diesel from 16.75 percent to 30 percent.
The May 5 VAT hike translated into steepest ever price increase of Rs 7.10 per liter in diesel. Rates of petrol went up by Rs 1.67 a liter. The subsequent increase in the base price of diesel because of a surge in international rates led to an increase in the incidence of VAT as the tax is levied on an ad valorem basis.
The VAT hike made diesel costlier than it was being sold in adjoining cities - Gurugram, NOIDA, and Ghaziabad, putting local industries using the fuel at a cost disadvantage.
In comparison to the pre-VAT reduction price of Rs 81.94 per liter in Delhi, diesel was priced at Rs 73.83 per liter in NOIDA, Rs 73.68 in Ghaziabad and Rs 73.98 in Gurugram.
While Kejriwal announced a cut of VAT on diesel, no reduction in petrol was announced.
Petrol in Delhi costs Rs 80.43 per liter while in adjoining NOIDA it comes for Rs 81.08 and in Ghaziabad for Rs 80.95 and is priced at Rs 78.64 per liter in Gurugram.
The May 5 hike in VAT rates would have led to Rs 900 crore additional revenue for the state government in a year.
"Delhi Cabinet has decided to reduce VAT on diesel from 30 percent to 16.75 percent. This will reduce the price of diesel in Delhi from Rs 82 to Rs 73.64 i.e. by Rs 8.36 per liter," Kejriwal said.
He said reviving the economy is a serious challenge but it will be achieved together with the two crore people of Delhi like they have helped in bringing the virus under control.
"The traders, industrialists, and people had demanded that VAT on diesel be lowered as it was causing distress to them. I think this decision will help in giving a push to Delhi's economy. I appeal to the traders, shopkeepers, and industrialists to open their establishments but maintain precaution. Together we will bring Delhi's economy back on tracks," he said.
The chief minister said he will virtually interact with industrialists and traders in the coming days to understand their problems so that additional efforts are made to solve them.
The Delhi government in the past one week took several steps, like allowing street vendors and hawkers and launched a jobs portal, to revive the economy of the city, he said.
The jobs portal has received a massive response and 7,577 employers have registered on it to offer over two lakh jobs, Kejriwal said.
More than 3.20 lakh job-seekers have also registered on the portal, he added.