- Tax Parity Demand: The All Haryana Petroleum Dealers Association is urging the state government to slash VAT on fuel to align with the central government’s excise duty reductions, citing a massive ₹6.17 price gap per liter of diesel compared to Chandigarh.
- Financial Erosion: Over 4,800 retail outlets are facing combined losses exceeding ₹200 crore due to unrevised dealer commissions and the 0.75% Merchant Discount Rate (MDR) on digital transactions that consumes nearly 90% of their operating margin.
- Market Shift: The association warns of severe revenue leakage as logistics providers and passenger fleets pivot toward neighboring states and alternative energy sources like CNG and hybrids, which are nearing market parity in the mid-2026 fiscal cycle.
The economic friction between state fiscal policy and the operational survival of fuel retailers has reached a breaking point across Haryana. As the mid-2026 fiscal quarter nears, the All Haryana Petroleum Dealers Association (AHPDA) has issued an authoritative ultimatum to the state government: reduce Value Added Tax (VAT) on petrol and diesel or face a systematic suspension of credit fuel services to government departments. This move signals a deeper crisis in the energy retail sector, where rising operational costs are colliding with stagnant margins in an increasingly digital-first economy.
The Growing VAT Disparity and Revenue Leakage
The core of the grievance lies in the significant price delta between Haryana and its neighbors. In May 2026, diesel in Chandigarh is retailing at approximately ₹89.47, while Haryana’s rates hover near ₹95.64 due to the current VAT structure of 16.00% plus a 5% additional tax. This disparity has triggered a “revenue migration,” where heavy-duty transport and logistics giants are opting to refuel outside state borders, leaving Haryana’s 4,800 pumps with dwindling volumes.
Data Highlight: The Commission Crisis
According to the Apoorva Chandra Committee benchmarks, approximately 90% of a dealer’s commission is consumed by operational overheads, including electricity, labor, and the 0.75% bank MDR on digital payments.
“The central government has already recalibrated excise duties to provide relief to consumers, but the state’s refusal to adjust VAT is strangling local retailers,” stated Anil Yadav, President of the Petrol Pump Association. The association notes that while fuel prices have surged significantly over the last five years, dealer commissions have remained static, failing to account for the inflationary pressures of the 2026 economy.
2026 Fuel Price Comparison: Haryana vs. Neighbors
| Region | Petrol (per Liter) | Diesel (per Liter) | VAT Status |
|---|---|---|---|
| Haryana | ₹102.10 | ₹95.64 | 18.20% + Surcharge |
| Chandigarh | ₹96.20 | ₹89.47 | Optimized |
| Punjab | ₹98.50 | ₹91.15 | Competitive |
The MDR and Digital Payment Burden
A specific point of contention in 2026 is the impact of digital payment charges. While the Indian economy has moved toward a “cashless” model, petrol pump dealers are bearing the brunt of the 0.75% Merchant Discount Rate (MDR) imposed by banks. Since fuel is a high-ticket, low-margin commodity, these transaction fees effectively wipe out a substantial portion of the dealer’s net profit. According to official data from the Petroleum Planning & Analysis Cell (PPAC), these hidden costs have compounded the financial strain on retail outlets, especially as labor costs for maintaining 24/7 operations continue to climb.
M.C. Gupta, General Secretary of the association, highlighted that pump operators are often forced to pay excise duty upfront to oil marketing companies (OMCs). Any subsequent reduction in sale price by the government leads to immediate inventory losses. “We are asking for a fair playing field where state taxes do not drive our customers across the border to Chandigarh or Delhi,” Gupta added.
Future Outlook: Competition from Alternative Energy
The association’s urgency is also fueled by the rapid adoption of alternative energy. In early 2026, the sales of CNG and Hybrid vehicles reached a “striking distance” of traditional petrol internal combustion engines (ICE). As the 2026 investment trends favor green energy infrastructure, traditional fuel dealers realize that their window for profitability is narrowing. Without immediate VAT relief, many pumps—particularly those in border districts—may face permanent closure, disrupting the state’s fuel supply chain and impacting the broader 2026 economic outlook.
“If the Haryana government continues to ignore the inter-state price disparity, the state stands to lose not just tax revenue, but the very infrastructure that powers its transport and agriculture sectors.” — Official Statement, AHPDA.
For now, the association has clarified that while they will protest by refusing to purchase fresh stock from companies on designated days, they aim to minimize the direct impact on the general public. However, the threat to stop refueling government vehicles remains a potent lever that could force the state’s hand in the coming weeks.
