Since March, petrol and diesel prices have increased by Rs 5.60 and Rs 6.31, respectively, in Delhi. Petrol price has now crossed Rs 89 litre in Maharashtra, which is the highest among all the states as Maharashtra charges the highest VAT at 39.12 per cent on a litre of petrol, while Goa charges just 16.66 per cent per litre, which is the lowest. This windfall gain may push down the states fiscal deficit by 15-20 basis points, if other things remain unchanged, the report said.
“We also estimate that since the states are having an incremental revenue over the budgeted one, they could cut on an average petrol prices by Rs 3.20/litre and diesel by Rs 2.30/litre, without affecting their revenue arithmetic," the report said, adding Maharashtra, Madhya Pradesh, Punjab, Tamil Nadu, Andhra Pradesh, Rajasthan and Karnataka can fiscal headroom to lower petrol prices by at least Rs 3 and Rs 2.5 on diesel.
If the states impose VAT on base price (crude, transportation cost and commission), then diesel prices can drop by as much as Rs 3.75 and Rs 5.75 for petrol. However, this will result in a revenue loss of states of around Rs 120 billion (net of Rs 346.27 billion loss and Rs 227 billion gain from oil bonanza).
The calculation is based on the assumption that for FY19, crude averages at $75 a barrel and the exchange rate at Rs 72, SBI Research said.