Petrol and diesel will be dearer in the national capital with the AAP government's decision to increase VAT rates on them. The raise, effective from midnight on Wednesday, is the first hike in Value Added Tax effected by Aam Aadmi Party government since capturing power in Delhi.

Petrol prices in Delhi hiked by Rs 2.78 per litre while diesel will be costlier by Rs 1.83. — Press Trust of India (@PTI_News) July 15, 2015

But the Central government has reduced prices of petrol by Rs 2 per litre which excludes local levies and will be effective from midnight on Wednesday.

Petrol and diesel price cut by Rs 2 per litre, excluding local levies, with effect from midnight tonight. — Press Trust of India (@PTI_News) July 15, 2015

The decrease in diesel prices would also be less in Delhi due to a hike in Value Added Tax (VAT) by Arvind Kejriwal-led Aam Aadmi Party government.

The new rates announced by the oil marketing companies will be effective from midnight on Wednesday.

While, the reduction in petrol and diesel prices was reflective of local trends, the consumers in Delhi will not be able to get the benefit as the Arvind Kejriwal government raised VAT on the two fuels robbing city customers of the reduction.

"The VAT rate on petrol has been increased from 20% to 25% and on diesel from 12.5% to 16.6%, thereby resulting increase in the price of petrol by Rs 2.78 per litre (approx.) and in the price of diesel Rs 1.83 per litre," Delhi government said in a statement.

Delhi Govt hikes VAT on petrol and diesel prices: Increase in petrol price by 2.78 per litre. & diesel by 1.83 per litre. (approx.) — ANI (@ANI_news) July 15, 2015

After the increase in retail prices of petrol and diesel in Delhi, the retail price for petrol will be Rs 69.43 per ltr. (approx.) and the same for diesel will be Rs 52.07 per ltr.(approx.).

According to government, on the basis of the decision taken in the meeting of Finance Ministers of northern states on May 21, 2015 for bringing uniformity in the tax rates, it has decided to increase VAT rate on diesel and petrol.

A senior government official said that after this increase in the rate of VAT, the retail price of diesel in Punjab, Haryana and Delhi will be almost the same.

The government has issued the notification in this respect on Wednesday.

There will be decrease in Petrol price by Rs.2.00/litre(excluding State levies) and Diesel(Retail) by Rs. 2.00/litre(excluding State levies) — ANI (@ANI_news) July 15, 2015

The Delhi Assembly had on June 30 cleared VAT Amednment Bill, tabled by Arvind Kejriwal's government, which allowed it to increase VAT up to 30% on 11 goods including petroleum products, tobacco and aerated drinks.

Petrol in Delhi will cost Rs 66.90 per litre from Thursday instead of Rs 66.62 at present. A litre of diesel will cost Rs 49.72 per litre as against Rs 50.22 earlier, Indian Oil Corp (IOC), the nation's largest oil company, said.

"Prices of petrol and diesel were last revised w.e.f. 1st July'15. Since last price change, there has been a decrease in international prices of both Petrol & Diesel. INR-USD exchange rate has also appreciated during this period. Combined impacts of both these factors warrant the said downward revisions," it said.

Price of petrol was last cut on July 1 by 31 paise per litre and diesel by 71 paise a litre.

"Since last price change, there has been a decrease in international prices of both petrol and diesel. Indian rupee-US dollar exchange rate has appreciated during this period. Combined impact of both these factors warrants a downward revision in prices, the impact of which is being passed on to the consumers with this price decrease," IOC said.