The YS Jagan Mohan Reddy government on Friday announced an increase in the prices of petrol and diesel by Re 1 per litre in the name of road cess, a move aimed at shoring up the state’s finances hit by the Covid pandemic.

An ordinance seeking to amend the APVAT Act, 2005, was promulgated by state governor Biswabhushan Harichandan in the evening, providing for levy and collection of a road development cess of one rupee per litre on petrol and diesel.

According to special chief secretary (revenue) Rajat Bhargava, the economic activity has come to a halt in the state ever since lockdown was imposed due to Covid-19 pandemic, affecting the revenues of the State during the months of April, May, June and July.

In April, the revenue realised in the state was only Rs 1,323 crore as against Rs 4,480 crore in April 2019 which accounts for only 29.5% of the total expected revenue. Similar trends were observed for the months of May, June, July and August also, he said.

Besides the fall in revenues, the Government of India has also not released the GST compensation for the year 2020-21 so far. While the stress on revenues from all sources continued, there is steep increase in the expenditure relating to the health services for combating Covid-19 pandemic. Furthermore, the government is also implementing several schemes for the welfare of people from downtrodden sections.

“The twin impact of fall in revenues and enhanced expenditure on health services and welfare schemes has impacted the capital expenditure on infrastructure development,” Bhargava said.

Taking all the factors into consideration and keeping in view the necessity of allocating dedicated funds to the road development in the state, the state government has decided to levy “Road Development Cess” of Re 1 per litre on petrol and diesel in addition to the existing levies on the two products in public interest, the official said.

“The proceeds of the Road Development Cess which will be around Rs 500 crore per annum shall be transferred to the Andhra Pradesh Road Development Corporation for exclusive use in developing road infrastructure,” he added.

Last week, the Jagan government increased the VAT on natural gas from 14.5 per cent to 24.5 per cent. Earlier in July, it increased the cess on petrol from Rs 2.76 to Rs 4 (an increase of Rs 1.24 per litre), apart from VAT of 31% and on diesel from Rs 3.07 to Rs 4 (an increase of 93 paisa per litre), apart from a VAT pf 22.25%, stating that the state’s own revenues had dried up due to Covid-19 pandemic situation.