FM asks states to end levies; states blame centre for inflation

Finance Minister Pranab Mukherjee on Wednesday asked the state governments to abolish octroi and mandi tax to check rising prices, even as the opposition-ruled states held the Centre squarely responsible for high inflation.

Finance Minister Pranab Mukherjee on Wednesday asked the state governments to abolish octroi and mandi tax to check rising prices, even as the opposition-ruled states held the Centre squarely responsible for high inflation.

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Addressing the pre-budget consultation meeting with the state Finance Ministers, Mukherjee said the state governments should end local taxes and bridge the gap between farmgate and retail prices.

The states on their part attributed the rise in prices to policies of the Centre and urged the union government to remove or lower duties on crude oil, petrol and diesel.

Asking state governments to play their part in controlling inflation, Mukherjee said, "I would urge you to review all local levies like mandi tax and octroi duty which add to prices of food articles and impede smooth movement of essential commodities."

Uttrakhand Chief Minister and Finance Minister Ramesh Pokhariyal Nishank, however, retorted by saying that, "price rise is not a subject of states. It is totally Centre's subject. We are ready to sit with the Centre and arrive at solutions. Inflation is high because of Centre's export-import policy".

Bihar's Deputy Chief Minister and Finance Minister Sushil Modi wanted the Centre to reduce duties on petroleum products to tame rising inflation which soared to 8.43 per cent in December, up from 7.45 per cent a month ago.

"Inflation, particularly in food and primary articles... fuelled by petrol and diesel increases has been a particular worry for all of us. While price increase due to international price movements is to some extent understandable, the commensurate increase in taxes, which are levied ad valorem can be avoided", Modi said.

Inflation, despite persistent efforts of the government and the Reserve Bank of India to check price, rose to 8.43 per cent in December, up from 7.45 per cent a month ago.

Food inflation had soared to a year's high of 18.32 per cent for the week ending December 25 before declining to 16.91 per cent in the subsequent week.

These figures do not reflect the recent decision of the centre to increase price of petrol by about Rs 2.50 a litre in view of the rising price of crude oil in the international market.

Referring to bottlenecks in supply chain, Mukherjee also asked the states to review and reform their agriculture produce and marketing laws.