29% of what you pay for CNG goes into govt coffers

Blame Centre and state government if you are feeling the pinch of high CNG prices, which crossed the key barrier of Rs50 per kg in Ahmedabad recently.

The prices are expected to touch Rs60-65 a kg in a year's time. At a time when citizens are struggling to cope with high inflation and uncertain economic scenario, it emerges that more than one-fifth of the money paid by you for one kg of CNG goes into Central and state governments coffers.  Every time you refuel your vehicle with CNG, the state and central governments take away a large chunk of your money. Centre levies 14.42% excise duty (including surcharge and education cess) on CNG. The state government charges 15% VAT on CNG sales, highest in the country.

Simple back-of-the-hand calculations show that union government earns around Rs5.50 as excise duty on 1 kg CNG while state government pockets nearly Rs6 as VAT on a kilo of gas. What is more, every time price rises, the state government's VAT earnings on CNG also go up accordingly.

Without central and state levies, the price of CNG works out at around Rs39 per kg. This figure also includes gas transmission cost, operational expenses, gas loss, as well as the margin paid to dealers. "There is no doubt that there is too much tax on CNG, and it needs to be reduced. There is definitely a case for reduction in taxes on CNG, particularly by Gujarat government, which has aggressively promoted gas consumption," said an official of a city distribution company, requesting anonymity.

The state government, which blames the Centre for high gas prices in the state, has categorically rejected any reduction in VAT on CNG. "There is no scope to cut VAT," state minister Vaju Vala, said recently.

Energy minister Saurabh Patel did not comment about the high rate of VAT on CNG but said gas prices in Gujarat would come down automatically if the state was allocated domestic gas. "New Delhi and Mumbai have been allocated cheaper domestic gas, while Gujarat has to depend entirely on imported gas. CNG prices in state can come down by 20-30% if we get domestic gas," said Patel.

With no relief in sight, one thing is sure. Consumers are going to feel the pinch even harder in coming months, more so as CNG prices are projected to increase to around Rs60-65 a kg by March 2013.