State cuts tax on diesel by 2 per cent

Chief Minister M. Karunanidhi on Thursday announced a 2 per cent reduction in tax on diesel in the State to counter the hike in prices of petroleum products announced by the Centre.

This will lead to revenue loss of Rs.260 crore a year. In addition, State Transport Corporations stand to add Rs. 210 crore to the losses as there is no move to raise bus fares.

Recalling the statement of Prime Minister Manmohan Singh, wherein he had said that States levying high tax rates should enforce cuts and absorb the petroleum price hike, Mr. Karunanidhi said when the Centre hiked fuel prices in 2006, Tamil Nadu was the first to cut sales tax, bringing it down from 25 per cent to 23.43 per cent.

Subsequently, the Centre lowered prices of petrol and diesel, but the State government did not restore the tax to the earlier, higher rate. Because of this, the government was losing Rs.200 crore each year.