Shimla, Oct 28 (IANS): After petrol, debt-ridden Himachal Pradesh Tuesday decided to hike value added tax (VAT) on diesel by one percent, which take up its price by 48 paise a litre.

Consensus was reached to increase the VAT on diesel by one percent which would be lower by 0.12 percent as compared to VAT rate applicable in neighboring Punjab, an official statement said.

Official sources said a decision in this regard was taken by cabinet presided over by Chief Minister Virbhadra Singh.

The hike in VAT would add to annual revenue earnings to the tune of Rs.26 crore, said the statement.

Earlier this month, the government increased VAT on petrol from 25 to 27 percent, which increased the price by around Rs.1.10 per litre.

Strongly opposing the government's decision to raise the VAT rate on petrol and diesel, the Himachal Pradesh Petrol Pump Dealers Association said the increase in taxes would hit business volume as buying will shift to neighbouring states of Punjab and Haryana.