4 min readChandigarhMay 27, 2026 02:03 PM IST
The cash-strapped Punjab government is on the back foot over the Opposition’s demand to reduce diesel prices by Rs 5 per litre to provide relief to farmers during the crucial agricultural season. If the Aam Aadmi Party (AAP) government, which is already scraping the barrel to pay salaries and manage mounting liabilities, agrees to absorb the burden, the move could cost the state exchequer nearly Rs 1,650 crore annually.
With diesel now retailing at around Rs 95 per litre in Mohali, after revised rates linked to the US-Iran crisis, Opposition parties accused the state government of burdening farmers–paddy transplantation season begins from June 1–and transporters. The AAP government, however, countered by alleging that the BJP was seeking to weaken Punjab’s economy through “irresponsible” demands for tax cuts.
Punjab BJP spokesperson Pritpal Singh Baliawal has asked the government to reduce taxes on petrol and diesel instead of criticising the Centre over the fuel price hike. Terming it as its “double standards”, Baliawal said while the government continued to blame the Centre over rising fuel costs, it was itself earning substantial revenue from petrol and diesel sales.
In a statement, Baliawal said the Punjab government was currently levying 16.58 per cent value added tax (VAT) along with an additional 10 per cent tax on petrol, resulting in approximately Rs 18-19 per litre being collected in taxes.
Responding sharply, Punjab Finance Minister Harpal Singh Cheema accused the BJP of trying to target the state’s finances. “Why does the BJP want to weaken only the state’s economy? Why did it not freeze fuel prices now? Why did it reduce prices only when crude oil became cheaper in the international market?” Cheema said.
The Congress too joined the attack, though it limited its demand to diesel prices, arguing that the agricultural economy would bear the brunt of the increase. Congress spokesperson Monty Sehgal, who is also a petrol dealer, said, “Every rupee increase in diesel prices during the agricultural season raises the input cost for farmers. The state government should reduce VAT on diesel by Rs 5 per litre to provide relief to farmers,” he said.
With paddy season beginning June 1, the Opposition has alleged that high diesel prices would impact the agricultural economy. (File Photo)
More than half of Punjab’s fuel consumption is diesel
Punjab’s fuel consumption figures formed the backbone of the Opposition’s argument. Total fuel consumption in Punjab is estimated at around 38,000 kilolitre, with diesel contributing nearly 60 per cent of the total. Diesel consumption alone is estimated at around 2,70,000 to 2,80,000 kilolitre per month.
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“A reduction in petrol prices is not being demanded. To control inflation, we need to reduce the input cost of the agriculture and transport sectors,” said a petrol dealer.
The argument also carried a border-state dimension. According to industry estimates, lower diesel prices would help the government curb smuggling of diesel from Chandigarh, Jammu and Himachal Pradesh, where rates are comparatively cheaper.
The dealer argued that while the state could lose nearly Rs 1,650 crore annually because of the tax reduction, the losses could eventually be offset through higher sales volumes resulting from reduced inter-state smuggling and lower retail prices.
‘Time to protect farmers’
The BJP and Congress also questioned the timing of the fuel price increase during the agricultural season, alleging that governments and oil marketing companies had “earned lakhs of crores over the last four years because of low crude oil prices”.
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“This is the time to give back to the nation and protect farmers and ordinary citizens from the effects of inflation,” a leader said.
Opposition leaders further argued that while the government had frozen petroleum product prices in May 2022, it had failed to reduce retail prices when international crude oil prices softened. “If governments and oil companies benefited for four years, they should have supported the country for at least a few months before increasing fuel prices,” a leader said.
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