Telangana loses crores to fuel peddlers by refusing to cut VAT on diesel

HYDERABAD: Taking advantage of the Telangana government’s decision not to reduce VAT (Value Added Tax) on petrol and diesel, a new industry has sprouted in the State. Fuel peddlers are buying fuel from Bidar and other areas on the Telangana-Karnataka border and selling it in Hyderabad, causing a loss of thousands of crores to the State exchequer.

Diesel is about Rs 12 per litre cheaper in Karnataka compared to Telangana and this new breed of ‘hawks’ has taken to supply it in bulk to TSRTC depots, contractors and other businesses that consume fuel in large quantities.

According to M Amarender Reddy, president of Telangana Petrol Dealers Association, around 200 heavy vehicles enter Telangana to deliver diesel here every day. He says that a lion’s share of this goes to TSRTC depots which have been procuring diesel from bulk suppliers who quote the lowest price.

Amarender Reddy estimates the requirement of diesel in RTC depots is anywhere between 6 to 10 lakh litres per day. After deducting Rs 2.25 from the diesel price of Rs 97.75 per litre as their margin, and ascertaining 27% VAT on the price, the State loses Rs 25.785 per litre as VAT. With an estimated 3 lakh litres being delivered to RTC depots this way, the loss touches Rs 77.5 lakh per day.

Amarender Reddy claims that since February 2022, when the Karnataka government reduced VAT on petrol and diesel, Telangana lost around Rs 2,000 crore of VAT revenue. Also, there is no guarantee that the fuel supplied is not adulterated. Fuel peddlers find customers in heavy industries, contractors of large irrigation projects and road works who use machinery like JCBs that consume a lot of diesel. They are known to use biofuels like palm oil to adulterate diesel.

“Last month, a petrol dealer in Warangal was caught stocking 1,20,000 litres for such a delivery. Officials shut the petrol bunk, but the business reopened within no time. We ourselves caught 5-6 vehicles red-handed,” Amarender Reddy says.

Amarender Reddy says that the situation is likely to continue as both Telangana and AP governments have ignored Prime Minister Narendra Modi’s appeal to reduce VAT on petrol and diesel.“The revenue of five States has come down due to the Karnataka government’s decision to reduce VAT on petrol and diesel. This has created a mafia in these States, which has been thriving well,” he observes.