The government on Wednesday put on hold a hike in LPG prices in states including Karnataka, Madhya Pradesh and Kerala, where an increase in local levies had led to a rise in fuel rates.

The increase in state levies such as entry tax and octroi led to prices of domestic LPG rising in Kerala by Rs 4.50 per cylinder, Rs 3 in Karnataka, Rs 5.50 in Madhya Pradesh and Re 1 per cylinder in Uttar Pradesh. There was a small increase of 2 paise and 8 paise in PDS kerosene rates in Haryana and Uttar Pradesh, respectively.

On the other hand, a reduction in state levies led to a cut in LPG prices by Rs 9.50 per cylinder in Assam, Rs 1.50 in Bihar and Rs 3 per cylinder in Maharashtra. Rates of kerosene sold through the public distribution system fell by 11 paise per litre in Maharashtra and Rs 1.32 per litre in Navi Mumbai.

The Oil Ministry today ordered that the hikes in both LPG and kerosene rates be put on hold pending consultations with the state governments on state-specific levies.

However, the reduction in prices will be passed on to consumers, an official statement said in New Delhi on Wednesday. Besides excise duty levied by the Central government and sales tax or VAT by state governments, certain other local levies such as entry tax, octroi and input tax restrictions on VAT are applicable in some states.

"In order to ensure that revenue demands of certain states don't become a burden for consumers across the country, the Government had introduced the scheme of State Specific Costs (SSC) on July 24, 2012, to recover such irrecoverable levies from the consumers of the state/municipal area levying such taxes," the statement said.