Inter-state losses triggered fuel price hike: Karnataka govt

BENGALURU: In a fresh twist to the controversial decision of the govt to hike fuel prices by Rs 3, the administration has claimed that a lot of "inter-state losses" had influenced the move.
Economic advisor to CM Siddaramaiah, Basavaraj Rayareddy, told TOI that the govt had been repeatedly asked by Andhra Pradesh, Telangana, and ruling parties in Maharashtra to hike the fuel prices in Karnataka.
"Across as much as 700km, people from the other side of the border have been entering Karnataka to fill their tanks due to petrol and diesel being available cheaper than in their own states. This had created an impression that Karnataka taking volume sales from the neighbouring states was hurting their economies. They had been demanding repeatedly to hike the prices," said Rayareddy. He claimed that the price hike was a rational decision, which had to be considered for the purpose of ensuring "inter-state harmony".
The Yelburga MLA also claimed that in some cases, a lot of the border districts of the neighbouring states were filling their tanks every other day to sell them in black market back home. "With petrol prices as much as Rs 10 cheaper than in their states, it was giving rise to lot of black marketeering as well," he said.
Rayareddy said the biggest impact was being felt along the state's eastern border from Aurad in Bidar to Malur in Kolar and also in areas that border Maharashtra. Meanwhile, "internally", govt officials suggested the proposal for hiking the fuel prices had already been placed and approved by CM during budget 2024-25, but it was held back due to political reasons with Lok Sabha and subsequent MLC elections.
"Now, with the Lok Sabha polls completed and the model code of conduct lifted, it is considered the right time to hike the prices to recover revenue," said one official.
According to finance department officials, the Rs 3,000 crore gain by way of hiking the tax on the petrol and diesel was in fact "factored in" at the time of preparing the budget, placing a target of Rs 1.10 lakh crore in terms of the revenue.
"While we do not anticipate much shortfall in other revenue generation avenues, there is a plausible situation of a slight shortfall in IGST collections, as they are adjusted by the Centre on receiving the taxes from the sale of products, which are originally transported from Karnataka," said the official.
Rationalisation of duties on liquor likely
The state govt is also planning to "rationalise" the prices of high-end liquor early this week. According to officials, the govt is going to implement the proposal made in CM Siddaramaiah's budget speech of rationalising the high-end liquor prices by reducing the excise and additional excise duties to make it more "competitive" with the neighbouring states.
"For example, the price of Black Label in Karnataka is double than the neighbouring states. It is, in fact, more economically viable to fly down to these states and pick up the liquor. Now, we intend to rationalise this and increase our volume of sales," said Rayareddy.