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Kerala’s Fuel Sales Plummet as Cess Backfires, Government Revenue Takes a Hit

Fuel sales in Kerala have experienced a significant decline following the implementation of a Rs 2 per litre hike in petrol and diesel prices, aimed at boosting state revenue. This decline in sales has resulted in substantial tax losses for the government. Several factors contribute to this plunge, including reduced fuel consumption by private vehicles, a growing shift towards electric vehicles, and the trend of goods vehicles sourcing diesel from neighboring states.

The introduction of the cess has led to a shift in refueling practices for inter-state goods vehicles, which now seek fuel in other states. Even the buses operated by the Kerala State Road Transport Corporation have resorted to refueling outside the state. While fuel sales generally increase every month due to the rising number of vehicles, the pandemic period saw a significant decrease in consumption.

The Kerala Government initiated a social security cess of Rs 2 on petrol and diesel from April 1 of the previous year. Consequently, petrol prices rose to Rs 109.42 per litre (in Thiruvananthapuram), while diesel prices reached Rs 98.24 per litre. Comparing sales figures, 21.21 crore litres of petrol were sold in March this year, but the number dropped to 19.73 crore litres in April, reflecting a decline of 1.48 crore litres. Similarly, diesel sales decreased from 26.66 crore litres in March to 20.28 crore litres in April, a difference of 6.38 crore litres. Comparing these figures to the previous year, 19.98 crore litres of petrol and 23.78 crore litres of diesel were sold in April 2022.

The state government imposes a tax of Rs 25 on each litre of petrol and Rs 18 on diesel. As a result of reduced sales, the tax revenue difference between March and April 2023 amounts to approximately Rs 150 crore for both diesel and petrol combined.


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