The government has raised the tax levied on the sale of petroleum products by five rupees a liter, making the total tax amount to Rs 10 per liter.

The decision, taken by the recent cabinet meeting, was announced yesterday by Finance as well as Communication Minister Yubaraj Khatiwada.

It is important to note that the decision to increase tax comes at a time when the government has failed to spend over Rs 40 billion collected in infrastructure tax for development of the country’s infrastructure.

Minister Katiwada said, “The decision intends to accumulate resources for the development of infrastructure projects.”

The new tax will be applicable on petrol, diesel, kerosene, and aviation turbine fuel.

Earlier on May, 2016, the government had decided to impose five rupees per liter infrastructure tax on fuel.

The tax was meant for developing the 1,200-megawatt hydropower project on the Budhi Gandaki River that flows between Gorkha and Dhading districts.

Since then more than Rs 40 billion has been collected as infrastructure tax from fuel, as per Nepal Oil Corporation (NOC). However, the development of Budhi Gandaki Hydropower Project has not progressed so far, as the project is yet to complete the process of compensating owners of the acquired land.

People are concerned about the decision to raise tax on fuel saying that it would add financial burden on consumers as NOC will ultimately pass this financial burden to consumers who are already hit by inflation.

Meanwhile, higher fuel prices will not only hit consumers but also the economy at large, as rise in fuel prices also means rise in transportation costs.

Higher transportation costs will make goods costlier and raise inflation.

Meanwhile, NOC officials have reportedly said that the decision to raise infrastructure tax on fuel was taken with the consent of NOC and that the raised tax amount would not affect the retail price of petroleum products.

“The additional tax burden will not be transferred to consumers and will be adjusted from NOC’s profit,” said Sushil Bhattarai, deputy managing director of the oil corporation.