Punjab refuses to toe line of BJP-ruled states on fuel price cut
After Union finance minister Arun Jaitley on Thursday announced a ₹1.50 per litre cut in excise duty on petrol and diesel and a Re 1 per litre cut by oil marketing companies (OMCs), he had asked states to do their bit by slashing VAT by a similar amount.
Congress-ruled Punjab has refused to follow in the footsteps of the Bharatiya Janata Party-ruled states on cutting value-added tax (VAT) on fuel.
After Union finance minister Arun Jaitley on Thursday announced a ₹1.50 per litre cut in excise duty on petrol and diesel and a Re 1 per litre cut by oil marketing companies (OMCs), he had asked states to do their bit by slashing VAT by a similar amount.
As many as 12 BJP-governed states reduced their VAT by ₹2.50 a litre the same day, bringing petrol prices down by ₹5 a litre. But Punjab, which charges the highest VAT of 35% on petrol in north India, said states could not be asked to match the Centre’s cut.
State finance minister Manpreet Badal dubbed the Centre’s move “too clever by half”.
“If I can calculate, both the cuts will hit the revenue of states too. After reaping a windfall and hiking excise duty several times since it came to power, the Government of India has made a meagre cut in excise duty, not in special excise duty and in additional excise duty in which states have no share. All states will share the burden of excise cut and lose 63 paise per litre,” he said.
Manpreet said oil companies, too, booked heavy profits due to high fuel prices. “They will show lesser profit after absorbing the Re 1 per litre cut. Which means the income tax paid by them will come down, so will our share (42%) in it. Effectively, the Government of India will take a hit of 1.5% due to the meagre cut. It cannot ask states to take a bigger hit,” Manpreet said.
Other Opposition-ruled states such as Kerala, Karnataka, Delhi, Orissa, Tamil Nadu and West Bengal, too, refused to heed Jaitley’s request.
But Punjab may have to walk at least halfway owing to regional exigency. It has BJP-ruled states such as Haryana, Himachal Pradesh and Uttar Pradesh as its neighbours, apart from the union territory of Chandigarh where fuel rates are the lowest. The steep difference in taxes could lead to higher diversion of revenue to these states.
Punjab chief minister Amarinder Singh will be meeting the state’s excise, taxation and finance officials on Monday for a comparative study of fuel prices and take a call on the VAT cut.