Petrol and Diesel see a rise in prices following Puducherry’s decision to raise the VAT

The government of Puducherry increased the Value Added Tax (VAT) on petrol and diesel across all four regions of the Union Territory—Puducherry, Karaikal, Mahe, and Yanam—effective January 1. This led to a price hike of Rs. 2 per liter for both fuels. The revision was implemented to address a potential resource shortfall arising from the significant expenditure incurred due to Cyclone Fengal and relief measures, including a Rs. 5,000 cash disbursement to 3.54 lakh ration cardholders, which added Rs. 177 crore to the fiscal burden.

The VAT on petrol was increased from 14.55% to 16.98% in Puducherry and from 14.55% to 16.99% in Karaikal. Diesel saw an increase from 8.65% to 11.22% in Puducherry and from 8.65% to 11.23% in Karaikal. In Mahe, petrol VAT rose from 13.32% to 15.79% and diesel from 6.91% to 9.52%, while in Yanam, petrol VAT was revised from 15.26% to 17.69% and diesel from 8.91% to 11.48%. As of January 1, petrol prices stood at Rs. 96.26 and diesel at Rs 86.48 in Puducherry.

This revision is expected to generate an additional Rs. 15 crore in monthly revenue, with the government previously earning Rs. 60-65 crore from fuel taxes. Despite the hike, fuel prices in Puducherry remain lower than in neighboring Tamil Nadu by Rs. 6.54 for petrol and Rs. 7.91 for diesel.

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To further boost revenue, the government plans to increase liquor license fees across all categories, potentially adding Rs. 55 crore to the fiscal revenue. These measures aim to offset the financial strain caused by Cyclone Fengal relief and to sustain welfare schemes, including monthly assistance to women heads of below-poverty-line families and LPG subsidies.