Fuel price: Tax cut unlikely, Centre may wait for states to act

New Delhi, Sep 11: With Rajasthan and Andhra Pradesh reducing VAT on petrol and diesel, the question is will the Centre implement a cut in taxes. There is rising pressure on the government, but it did not want its welfare schemes to suffer for want of revenue.

The BJP has blamed global factors for the rise in fuel prices. We are standing with the people. We are trying to redress the issue, Union Law Minister, Ravi Shankar Prasad told a press conference.

Several officials have told the government that if foes in for a Rs 2 per litre reduction, then it would impact the revenue at least by Rs 28,000 crore. The government would instead wait for more states to reduce VAT as a result of which the prices would come down. This would in turn not impact the Centre's tax collection.

There has been an uproar over the hike in fuel prices. The Opposition had even organised a Bharat Bandh over this issue on Monday.

Meanwhile Petroleum Minister is said to have met with BJP chief, Amit Shah over this issue. The government feels that a cut in duties will hit the rupee as well as the interest rates due to the fallout on the bond market. This could lead to far bigger loss of nearly Rs 28,000 crore, the government also feels.