Post-election fuel price shocker by state government

Bengaluru: The humble vehicle owners of Karnataka got a shock after the state government announced an immediate increase in the sales tax on petrol and diesel. This decision ends a period of stable fuel prices that vehicle owners had enjoyed since post-Covid times.

The price of both petrol and diesel has been increased by Rs. 3 per litre. This comes after the last revision in November 2021 when the previous BJP-led state government reduced petrol prices by over Rs. 13 per litre and diesel prices by over Rs. 19 per litre to aid economic recovery post-Covid-19.

The fuel price hike is part of a broader debacle by the Congress-led state government to manage its finances, particularly in light of its commitment to implementing five major freebies, which costs around Rs.60,000 crore annually.

This increase in fuel prices is projected to generate an additional Rs. 2,500 crore to Rs. 3,000 crore for the current financial year. It is to be noted that the freebie schemes have earlier cost the people of Karnataka significantly. Recently, the state government had hiked the guidance value of properties by 15-30 per cent, imposed additional excise duty (AED) on liquor by 20 per cent across all categories, raised AED on beer from 175 per cent to 185 per cent, imposed additional cess on newly-registered transport vehicles and a lifetime tax on electric vehicles (EVs) priced above ₹25 lakh.

The last adjustment to fuel taxes was in April 2020, followed by a reduction in November 2021. The current increase is aimed at scavenging for funds to support the freebie schemes as well as to address funding shortages for developmental projects.

The increase in fuel prices is expected to have several knock-on effects. Firstly, the cost of goods transportation is likely to rise, which will impact the prices of daily necessities and services. The fuel price hike is anticipated to contribute to inflation, particularly affecting the cost of daily food items such as fruits, vegetables, milk.

Moreover, public transportation fares, including those for KSRTC buses, private buses, and taxis will be directly affected as they are also expected to increase. While the Congress couldn’t cross double digit in the Lok Sabha elections, the party managed to hike the petrol price to three digits. As of the latest revision, fuel prices in key cities of Karnataka are estimated to cross the Rs. 100 mark.

The Karnataka state government’s decision to raise fuel taxes has been met with public concern, especially among the hard working class who do not get freebies. Moreover, all the hikes that the people have to bear is most certainly directed towards the freebie commitments of Rs. 60,000 crore. Thereby barring development projects from receiving the funding it deserves.

As the state seeks to balance its commitments with developmental projects hanging in the balance, the impact on everyday expenses for its residents remains to be fully seen.