In a relief for people in Karnataka amid rising fuel prices, the state government has decided to slash petrol and diesel rates by Rs 2 per litre, said Chief Minister H.D. Kumaraswamy in Kalaburagi on Monday. "Today, we are going to reduce Rs 2 on both petrol and diesel," Kumaraswamy was qouted by news agency ANI.
A litre of petrol was being retailed at Rs 84.74 in Bengaluru on Monday, while the cost of diesel was Rs 76.16 per litre.
Notably, Kumaraswamy had hiked rates of tax on petrol and diesel by 2 per cent in July during his budget presentation in July. He had then argued that it was a necessary step to “augment resource mobilisation” towards fulfiling the promise of loan waiver to farmers. As a result, the prices had gone up by Rs 1.14 for petrol and Rs 1.12 by diesel in Karnataka.
Karnataka is the fourth state in a week to cut petrol and diesel prices. On September 9, poll-bound Rajasthan had slashed petrol and diesel prices by Rs 2.5/litre. This was soon followed by Chandrababu Naidu's government in Andhra Pradesh and Mamata Banerjee's in West Bengal.
However, the cut in tax is likely to have an impact on state revenues. The unforeseen expenditure on Coorg flood relief in Karnataka, which may not be fully offset by higher grants or other revenue mobilisation measures, can exert pressure on their fiscal balances, credit rating agency ICRA had said in a recent report. Now, the slashing of fuel prices is likely to add to the fiscal pressure.
"A rise in revenue expenditure beyond the budgeted levels, led by the funding of crop loan waivers, election- related spending and flood relief (Kerala and Karnataka), may lead to fiscal slippages for some states, unless their capital spending is curtailed below, or their revenue receipts are enhanced above the budgeted level for FY19," said the report.