How Telangana's policy fuelled a 23% hike in petrol prices

Petrol pump

A significant disparity in fuel pricing has placed an outsized burden on motorists in Telangana, with petrol costs in the state surging by more than 23% over the past five years, a rate nearly 10% higher than in major metros like Delhi and Mumbai.

According to data tabled in the Lok Sabha and reported by TOI, the price of petrol in Hyderabad, the reference city for Telangana, has climbed from Rs 87.06 per litre in 2021 to Rs 107.46 at present. This makes the city’s petrol the third most expensive in the nation, trailing only Pune (Rs 109.74) and Jalandhar (Rs 107.48). Among major urban centres, only Kolkata recorded a comparable hike.

The situation is attributed to a stark contrast in state-level taxation. While the central government reduced excise duties, providing relief elsewhere, the Telangana state government has maintained its Value Added Tax (VAT) on fuel. As confirmed by a report in TOI, Union Petroleum Minister Hardeep Singh Puri stated, "Central excise duty was reduced by Rs 13 on petrol and Rs 16 on diesel in Nov 2021 and May 2022 and this relief was fully passed on to consumers."

Minister Puri explained that the broader market context is defined by volatility, noting, "Crude oil prices continued to fluctuate due to various geopolitical and market factors." He highlighted that in Delhi, prices have actually fallen from their 2021 peaks to Rs 94.77 per litre for petrol and Rs 87.67 for diesel.

This policy divergence has created more than just pain at the pump; it has sparked a significant cross-border economic drain. Marri Amarender Reddy, president of the Telangana Petroleum Dealers Association, was cited by TOI as saying that the state is losing nearly Rs 2,000 crore annually in revenue as bulk buyers source their fuel from neighbouring Karnataka where prices are cheaper.

"Because of high VAT, southern states including Telangana are losing business to neighbours where petrol and diesel are cheaper, attracting bulk buyers," Reddy said. He detailed that until recently, the price difference was about Rs 12 per litre, making it highly economical for commercial entities and individuals near the border to purchase fuel from districts like Kalaburagi (Gulbarga) in Karnataka. "The state govt has not addressed this issue," he added.

The trend is not limited to petrol. Dealers have confirmed that diesel prices in Hyderabad have also climbed more steeply than in other major cities like Mumbai, further increasing the operational costs for transport and logistics businesses within Telangana.