Deep In Debt, Himachal Taxes Fuel To Fund Welfare For Widows And Orphans; Here's What Changes

Fuel prices have gone up in Himachal Pradesh following the introduction of a new cess aimed at funding welfare measures for widows and orphaned children. The levy came into effect at midnight on August 11, adding 60 paise to every litre of petrol and high-speed diesel sold in the state.

The State Taxes and Excise Department said the cess will be collected at the point of the first sale of fuel within Himachal Pradesh.

The new levy means consumers will pay an additional 60 paise per litre on both petrol and high-speed diesel. For a 10-litre purchase, the additional cost will be ₹6. A 40-litre tank fill-up will attract an extra ₹24, while purchases of 50 litres and 100 litres will cost ₹30 and ₹60 more, respectively.

The cess has been imposed under Section 6-A of the Himachal Pradesh Value Added Tax Act, 2005. It follows the passage of the Himachal Pradesh Value Added Tax (Amendment) Bill, 2026, by the state Legislative Assembly in March.

The amended law allows the government to levy the cess at up to ₹5 per litre. The current rate, however, has been fixed at 60 paise.

Why Himachal Introduced The Cess?

The cess has been introduced to fund social welfare programmes for widows and orphaned children. The state already runs welfare schemes for these groups, and the government sought a dedicated source of funding for them. The Bill was passed by a voice vote in March, while the Opposition walked out.

The move has drawn criticism from the petroleum dealers’ association, which has called the cess “unjustified”. The association has also raised concerns that higher fuel prices could encourage consumers to buy fuel in neighbouring states, potentially affecting state revenue.

It has also questioned the government over the number of beneficiaries and the proposed use of the funds.

Tax Burden On Diesel

The new cess comes after two hikes in VAT on diesel in Himachal Pradesh, each amounting to ₹3.

BJP MP Anurag Thakur said, adding the new cess to the earlier VAT increases has effectively raised the tax burden on diesel by ₹15.40. He estimated that the combination of VAT hikes and the cess could bring the state more than ₹1,000 crore a year.

Thakur said the additional burden would affect traders, drivers, farmers and commuters.

Why State Is Looking For More Revenue

Himachal Pradesh is facing financial pressures, with the state’s debt having crossed ₹1,04,000 crore. The state owes ₹13,000 crore in repayments for 2026-27, while it plans to borrow ₹10,000 crore during the year, leaving a ₹3,000 crore gap.

The state is also facing the impact of the 16th Finance Commission’s recommendation to end Revenue Deficit Grants from 2026 to 2031. The loss is expected to exceed ₹35,000 crore over five years.

Government employees have also faced delays in salary payments. Proposals including a 30% cut in official salaries and a “toilet tax” have also been discussed.

Fuel Cess Across States

Himachal Pradesh is not the only state to impose additional cesses on fuel.

Kerala has a ₹2 per litre Social Security Cess, while Andhra Pradesh levies a ₹1 per litre Road Development Cess. Goa has a 0.5% Green Cess, and Jammu and Kashmir imposes a ₹1.50 per litre Employment Cess.

Jharkhand levies ₹1 per litre, Madhya Pradesh 1%, Nagaland ₹2 per litre and Tripura 3% as road-related cesses.

Himachal Pradesh’s levy differs in its stated purpose, as it is specifically intended to fund welfare measures for widows and orphaned children.