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With elections just a few months away, Punjab is the first, and so far only, Congress-ruled state to have cut Value Added Tax (VAT) on petrol and diesel, days after the Centre cut excise duty on fuel.

The effective drop in fuel prices is the latest in a series of populist moves by the Charanjit Singh Channi government, despite an already burdened exchequer, to woo voters ahead of polls.

With a reduction of Rs 10 per litre in petrol and Rs 5 per litre in diesel, consumers in Punjab now pay Rs 96.16 per litre for petrol and Rs 84.80 per litre for diesel. The Shiromani Akali Dal, Bharatiya Janata Party and the Aam Aadmi Party had been demanding the state government to reduce tax on fuel to provide relief to consumers.

“We are reducing petrol rate by Rs 10 per litre and diesel rate by Rs 5 per litre from midnight,” Channi had announced on November 7. “Petrol in Punjab has become cheapest in the region. As compared to Delhi, petrol in Punjab now costs Rs 9 less,” Channi reportedly said, adding that this “hasn’t happened in 70 years”.

Among factors that prompted the move were next to no consumers at petrol pumps in the state with Chandigarh and Haryana already slashing prices. Petrol prices were reduced to Rs 94 per litre in Chandigarh and to Rs 95 per litre in Haryana.

Petrol pumps, especially in Zirakpur and Mohali, faced the heat as consumers flocked to the adjoining regions to fuel up. The BJP’s sub-par run in the recent bypolls, especially in Himachal Pradesh, attributed to rising fuel prices, are also believed to have spooked the Congress in Punjab with elections due in months.

With the VAT cut, the Punjab government will lose out Rs 4,150 crore in revenue. The state government had recently waived all pending water bills in both rural and urban areas, costing the exchequer around Rs 1,800 crore.

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