On 4 January, the Congress-JDS alliance state government in Karnataka increased taxes on fuel sold in the state. State tax on petrol was increased to 32 percent while that on diesel was increased to 21 percent, citing the adverse effect the cut in taxes has had on the state's revenue collection after the decline in crude oil prices in the last three months.
The taxes prior to the revision were at 28.75 percent on petrol and 17.3 percent on diesel.
"The revision has been made due to continuous fall in the prices of crude oil in the international market from past two-and-a-half months, which has resulted in the base price of both fuels plummeting substantially, causing an adverse impact on state's revenue collection," the chief minister's office said in a statement.
The statement further claimed that despite the revision retail prices of petrol and diesel were still lower than those in the neighbouring states considering base price as on 1 January. It also said that there was additional collection of Rs 1.14 and Rs 1.12 per litre on petrol and diesel, respectively, because of the government increasing the tax rate, from 30 percent to 32 percent and from 19 percent to 21 percent, respectively, from July 15, 2018 and seeing the substantial increase in base prices of fuel in the month of August, the rates were Rs 2 per litre each to reduce the burden on the residents of Karnataka.
On 5 October, the Union government also reduced the central excise duty on petrol and diesel prices by Rs 1.5 per litre and also directed Oil Marketing Companies to cut petrol and diesel prices by Rs 1 per litre out of their own margin, it further said.