CM hits out at Modi, says Maharashtra cannot be blamed for high fuel prices
Hours after prime minister Narendra Modi blamed Maharashtra and other non-Bharatiya Janata Party (BJP)-ruled states for the high fuel prices, chief minister Uddhav Thackeray called it unfair and said the difference between the state and Central taxes was negligible
Hours after prime minister Narendra Modi blamed Maharashtra and other non-Bharatiya Janata Party (BJP)-ruled states for the high fuel prices, chief minister Uddhav Thackeray called it unfair and said the difference between the state and Central taxes was negligible. The state government is expected to reduce the value-added tax (VAT) on petrol and diesel to bring it to the level of the Central taxes and cess so that it can politically gain ground in the ongoing blame game.
Modi chaired a review meeting on the Covid-19 situation with the chief ministers of all states on Wednesday.
After the Central government cut the cess on petrol by ₹5 a litre and on diesel by ₹10 a litre on November 4, most of the BJP-ruled states brought down their own taxes to reduce the prices during Diwali. The Maharashtra government, however, did not follow suit, resulting in high fuel prices compared to neighbouring states.
The state is expected to discuss this matter in the cabinet meeting on Thursday. It may reduce VAT by around ₹1 to bring it to the level of the Central taxes. “VAT on diesel is less by almost ₹2 [ ₹22.37 against the Centre’s ₹24.38 per litre], while it is more by 97 paise [ ₹32.55 against the Centre’s ₹31.58 a litre] as far as petrol is concerned. We are thinking of doing away with the difference so that we can contend that the high prices are because of the Central taxes,” a senior minister, who did not wish to be named, said.
The minister said even if the state reduced VAT and cess by ₹5 a litre, they could not match the prices in neighbouring states and union territories.
“Instead of competing with these states/UTs named by Modi, we would point to the high Central taxes. We can keep demanding the reduction in the Central taxes further to counter them politically. If the Centre reduces its taxes further, we can think of reducing ours, most probably ahead of the local body polls so that we can benefit from it. Reduction of VAT on petrol and diesel by ₹2 per litre in the state will result in a loss of ₹275 crore a month, which is a burden we are not in a position to take currently,” the minister said.
The remarks by PM Modi sparked a row between the Centre and the state government. Thackeray said Maharashtra had been getting stepmotherly treatment by the Centre despite being the highest contributor of direct taxes and the goods and services tax (GST). “The contribution of Central taxes on diesel in Mumbai today is ₹24.38 a litre against the state taxes of ₹22.37 a litre. Similarly, the Central taxes on petrol per litre in the city is ₹31.58 against the state taxes of ₹32.55. This proves that the higher rates of fuel in Maharashtra are not because of the state taxes.”
The CM further said Maharashtra got 5.5% from the devolution of Central taxes against which the state’s share in the direct taxes in the country was 38.3%. “Maharashtra is the highest contributor of GST with 15% of the total national collection. Despite this, the Centre has not paid the dues towards the GST compensation worth ₹26,500 crore accrued till March 2022.”
Thackeray also said the state government brought down VAT on compressed natural gas and piped natural gas to 3% from 13.5% effective April 1.
Thackeray’s strongly worded reaction is significant in the wake of the strained relations between Sena and BJP of late. A section of the leaders from the ruling Maharashtra Vikas Aghadi feels the PM’s blame game was uncalled for. “It was not a meeting on financial issues. Secondly, he targeted only non-BJP states which is not appropriate for the post he holds,” a Nationalist Congress Party minister said.
Former chief minister and leader of the opposition Devendra Fadnavis, in a series of tweets, said, “Blame-game is safe and good for hiding misdeeds but it doesn’t give relief to the common man. When the government of India reduced excise duty in November, it also requested States to reduce taxes, but non-BJP states including #Maharashtra are busy only profiting at the cost of suffering of citizens….. Maharashtra has already earned ₹3400 crore profit (windfall out of increased prices). It is my sincere request to the CM & Govt of Maharashtra to act immediately and give relief to all Maharashtrians including #MarathiManus!(sic).”
Fadnavis said the state government was trying to divert the subject by raising the issue of GST compensation. The Centre would pay all dues towards GST, but the state government should speak about its high taxes on petrol and diesel, he said.
VAT and cess levied on petrol and diesel in Maharashtra is one of the highest in the country. VAT on petrol in Mumbai, Thane, Navi Mumbai, Aurangabad and Amravati is 26%, while it is 25% in the rest of the state with an additional cess of ₹10.12 per litre across Maharashtra. VAT on diesel is 24% in Mumbai, Thane, Navi Mumbai, Amravati and Aurangabad, whereas it is 21% in the rest of the state with an additional cess of ₹3 a litre across Maharashtra.
If the state government decides to cut VAT by ₹1 on petrol and diesel, it amounts to a reduction in the monthly revenue by ₹125 crore ( ₹85 crore from diesel and ₹40 crore from petrol). The State’s estimated revenue from VAT on petrol and diesel in the current financial year is ₹35,000 crore against ₹29,500 crore collected in 2021-22. The annual sale of diesel in Maharashtra is 1.15 lakh kilolitre while the sale of petrol is just 50,000 kilolitre.