Ranchi: The state government is expected to generate ₹634.55 crore in annual revenue by reducing the VAT rate on diesel to 15% for coal companies and mining industries. This move aims to encourage bulk diesel purchases within the state, which had been declining due to higher fuel prices compared to neighbouring states like Uttar Pradesh and West Bengal.
Despite the VAT reduction for industries, there will be no relief for the general public, who will continue to pay ₹92.81 per litre. Industries, however, will now be able to buy diesel at a reduced price of ₹87.48 per litre, making Jharkhand a more competitive fuel market for industrial consumers.
The decision follows a government review that revealed a sharp decline in diesel-related VAT revenue. It was found that many coal and mining companies in Jharkhand were purchasing diesel in bulk from depots in Mughalsarai (Uttar Pradesh) and Durgapur (West Bengal), where fuel is significantly cheaper.
In FY 2023–24, the total diesel sales in Jharkhand amounted to 1,912 thousand kilolitres (TKL), generating ₹3,157 crore in revenue for the state. However, of the 454 TKL diesel consumed by industries, only 96.6 TKL was purchased within the state, while 358 TKL was sourced from outside Jharkhand—leading to a revenue loss of ₹634.55 crore.
The state government found that in Mughalsarai, diesel was being sold at ₹87.94 per litre, while in Durgapur, the rate stood at ₹90.34 per litre. The lower prices in these states were attributed to bulk purchase discounts and lower local taxes, which Jharkhand lacked.
To address this revenue drain, the state government decided to reduce VAT on bulk diesel purchases from 22% to 15%. The new policy is expected to incentivize industries to procure fuel within the state, thereby improving internal revenue and reducing outflows to other states.
Officials believe this move will not only make diesel more affordable for industries in Jharkhand but will also redirect lost revenue back into the state’s coffers.