``The state government will earn an estimated Rs 180 crore annually as a result of this hike,'' Joshi told presspersons after a cabinet meeting where the decision was taken. He said the sales tax, which was 21 per cent for both petrol and diesel, has been increased to 23 per cent for diesel and 25 per cent for petrol. A notification to this effect was scheduled to be released later in the evening.

When asked the reason behind the sudden increase (fuel prices are usually increased by the Central Government in March-April), Joshi said the decision was pending for a long time. ``The last time weraised the prices was in 1995. It was also noticed that the sales tax on fuel was more in neighbouring states as compared to Maharashtra,'' he added.

Meanwhile, though the cabbies decided to absorb the hike, the autorickshaw union said it would demand an increase in fares. According to A L Quadros, president of Bombay Taximen's Union, since most taxis in the city were using compressed natural gas (CNG) for fuel, the hike would not have much impact on them. ``Only 15,000 taxis now run on petrol, and therefore the union does not want an increase in fare,'' he explained.

However, Thampi Kurien, working president of the Bombay Autorickshawmen's Union, said he would soon meet government officials and demand a hike in fares.

The industry reacted to the news with fears of inflation and increased production costs. Various industry bodies said the most obvious fall-out of the hike in petrol and diesel sales tax would be a sharp drop in industrial production and capital flow to neighbouring states. The hikewould have an adverse effect on prices and the ultimate loser would be the consumer, they said.

The Bombay Chamber of Commerce and Industry (BCCI) issued a statement saying the hike was likely to cause ``cost-pushed inflation.''

Vijay Kalantri, president of the All India Association of Industries (AIAI), said the industry would not be able to bear the additional burden and would have to pass it on to the consumer. ``In view of the recessionary trend in industry, the hike will have a cascading affect on production costs,'' he said.

The Confederation of Indian Industry (CII) termed the hike untimely because most sectors of the industry were already facing demand contraction. With 80 per cent of goods -- including cement, manufactured goods, consumer products and office equipment -- transported by road, the industry would certainly feel the impact of increased transportation costs, the CII said. It criticised the hike, especially considering the fact it was hardly two months since the Maharashtra StateElectricity Board hiked its power tariff.Chambers of industry were unanimous in their opinion that the freight on all raw materials and inputs would go up. ``Even vegetables are transported in vans...their prices will go up further,'' Kalantri said.

Ramu Deora, president of the Federation of Indian Export Organisations (FIEO) felt international trade would be affected because of increased costs on transport of import and export cargo. ``Sixty-five per cent of cargo is routed through the Jawaharlal Nehru Port Trust and the Bombay Port Trust,'' he said. Petrochemicals and chemicals industry would be badly affected, he added. Reacting to CM's statement that enhanced rates were still lower or on par with the neighbouring states of AP, MP and Gujarat, he said indirect taxes in Maharashtra were higher than in any other state. ``There is no octroi in Gujarat and several other states,'' he said, adding that the industrial raw material was ``already being charged 2 per cent to 13 per cent sales tax. ''