This is the third change in petrol and diesel tax rates since H.D.Kumaraswamy took over as Karnataka chief minister in May 2017. He is leading the Janata Dal (Secular), or JDS, and Congress coalition government.
“In the last two and half months there has been a continuous fall in crude oil prices in the International market. As a result the base price of petrol and diesel have come down substantially, causing an adverse impact on the state’s revenue collections," the Karnataka government said in a statement on Friday.
The increase in petrol and diesel prices is likely to blunt the Congress’s attacks on the Bharatiya Janata Party (BJP)-led union government over increasing prices of fuel and other essential commodities, ahead of 2019 Lok Sabha elections.
The Congress had forced it’s ally JDS to reduce petrol and diesel prices last year.
The Kumaraswamy-led Karnataka government had in July last year proposed to increase taxes on petrol from 30% to 32% and diesel from 19% to 21% to help fund it’s ₹ 45,000 crore farm loan waiver, but was forced to roll back taxes after several non-BJP state governments decided to cut their taxes to mount pressure on the centre to follow suit.
In September, Kumaraswamy, who continues to hold the finance portfolio, cut fuel taxes under pressure from the Congress. The prices of petrol and diesel was reduced by ₹ 2, as a result, with tax incidence standing at 28.75% and 17.73%, respectively.
On 5 October, the union government reduced central excise on petrol and diesel by ₹ 1.50 and directed oil marketing companies to cut their own margins by ₹ 1.