Mumbai, Oct 10 (IANS): Petrol and diesel products will become cheaper in Maharashtra from midnight on Tuesday due to four per cent reduction in Value Added Tax (VAT), an official said here.

The net reduction in petrol and diesel prices will be around Rs 2.33 per litre and Rs 1.25 per litre respectively, though the various cess levied by the state have not been reduced, said All India Petrol Dealers Association Spokesperson Ali Daruwala. 

The move follows a communication from Union Finance Minister Arun Jaitley to all state governments to consider reducing state-level taxes on petrol and diesel products, which increase prices at local levels.

Mumbai Petroleum Dealers Association President Ravi Shinde said the current VAT in the state is around 26 per cent on petrol and 21 per cent on diesel, plus different cess totalling Rs 9 per litre. This leads to a hike in the prices of petrol and diesel by nearly 50 per cent for every litre in the state.

"Our demand for reduction in cess on petrol and diesel products by the state government was rejected and we were informed that it is utilised to repay farm loans waiver package announced in June," Daruwala told IANS.

With the reduction in VAT, the Maharashtra government is likely to suffer a loss of around Rs 2,500 crore.