The Congress-led government has hiked the state sales tax from 25.92 percent to 29.84 percent for petrol and from 14.34 percent to 18.44 percent for diesel resulting in an increase in fuel prices with immediate effect. 

Following a government order in this regard on Saturday, petrol will cost Rs. 102.86/litre and diesel will be available at Rs. 88.94/litre after the revision, according to the Petroleum Dealers Association.

The move is being largely seen as a way to fund the Congress government’s five guarantee schemes, including the Shakti scheme (free bus travel for women), Gruha Jyoti (free electricity up to 200 units), Gruha Lakshmi (cash incentives for women), Anna Bhagya (free ration for poor households) and Yuva Nidhi (cash incentives for graduates).

The estimated cost for funding the guarantee schemes is between Rs. 50,000 and Rs. 60,000 crore.

In the 2024-25 budget, Siddaramaiah had announced Rs 1,20,373 crore for welfare programs, of which a whopping 43 percent (Rs. 55,000 crore) was set aside for the five guarantee schemes.

The Karnataka government last revised the prices of fuel in November 2021, when the previous BJP-led state government reduced petrol prices by Rs 13.30 per litre and diesel by Rs 19.40 per litre given the Covid-19 pandemic.

The current revision comes at a time when the Congress government in Karnataka is battling the BJP at the Centre over ‘tax injustice’ and is finding it ‘challenging’ to get the state’s share of funds.

The Congress government has highlighted pending GST compensation dues, tapering of funds for Centrally Sponsored Schemes and zero growth in GST devolution over the past six to seven years.

In September, last year the government increased the guidance value on properties by 25-30 percent across the state to shore up additional revenue.

With the revision, the state would earn an additional Rs 2,000 crore in the form of stamp duty imposed on the sale value of property, according to Revenue Minister Krishna Byre Gowda.