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The state’s hopes to make a shift to Liquefied Natural Gas (LNG) fuel, leaving behind petroleum-based fuels, solely depend on the state Budget. All the stakeholders in the sector expect an announcement from the Finance Minister to exempt value added tax (VAT) on LNG or to reduce it from the current 14.5 per cent to at least 5 per cent.

Presently, Petronet is quoting LNG at $23.74 per million British thermal unit (MMBtu), which is unaffordable to the local buyers in the state. The VAT from LNG is expected to bring a whopping `1000-crore revenue annually for the state exchequer, but if the buyers stay away from it, the expected revenue would stand as ‘nil’.  Economists opine that if the rate is reduced to 5 per cent, which is the prevailing charge in states like Haryana and New Delhi, the government would loss around `700 crore, but in the long run it will be beneficial for the state as there may be more takers for the fuel. “In other states where LNG is being used as fuel, the VAT component is only 5 per cent. If the FM announces reduction in tax rate, around $3 will be reduced on the price,” said M P Sukumaran Nair, Director, Centre for Green Technologies.

Through the decision to forgo VAT on the subsidy amount of LPG, the state government has already taken an additional burden of `247 crore.  The sales tax and VAT revenue in 2000-01 was `4,344.33 crore, which increased to `28,456.62 crore in 2013-14.

Source-On Request