Bengaluru: The Karnataka government announced on Saturday a hike in sales tax on fuel, resulting in an increase of Rs 3 per litre for petrol and Rs 3.5 per litre for diesel. This move, initiated by Chief Minister Siddaramaiah, aims to mobilise additional resources for the state.

According to sources, the government expects this tax hike to generate between Rs 2,500 and Rs 2,800 crore during the current financial year. Media reports, citing a notification issued by the Finance Department, stated that the sales tax on petrol has been increased by 3.92 percentage points, while the tax on diesel has been raised by 4.1 percentage points.

The decision comes in the wake of the Lok Sabha poll results, where the ruling Congress party won nine out of the 28 seats in Karnataka, leading to disappointment within the party. This measure was implemented shortly after Siddaramaiah, who also serves as the finance minister, reviewed the state’s revenue generation and fiscal position.

This year, Siddaramaiah has allocated a substantial Rs 52,009 crore for the Congress’ flagship 'guarantee' schemes, a significant increase from the Rs 37,325 crore spent on these schemes last year. The government is concerned about resource mobilisation to meet the financial demands exacerbated by these 'guarantee' schemes.

The Congress government faced nearly three months of revenue collection slowdowns between March 14 and June 4 due to the Lok Sabha election model code of conduct. This has impacted the first quarter’s fiscal performance.

Earlier this week, during a review of the state’s finances, Siddaramaiah urged officials to intensify their efforts to meet the revenue collection targets.