Fuel focus on states: Kerala cuts prices by Rs 1, Punjab says can’t lose revenue
Congress dharna today: Jakhar said Punjab will cut tax if Modi regime fails to tame fuel prices, but finance minister Manpreet says have to keep up pressure on Centre.Updated: May 31, 2018 09:31 IST
With fuel prices on fire, a heated blame game is on between the states and the Centre. The Congress will hit the streets on Thursday to protest against the “failure” of the BJP-led central government to bring down prices of petrol and diesel, which have notched up fresh records this month. But it is Kerala which took the lead among opposition-ruled states to soften the blow by slashing fuel prices by Re 1 a litre by cutting its tax from June 1. This, Kerala chief minister Pinarayi Vijayan on Wednesday said, would “set an example for the Centre to follow.”
On the eve of the protest, though, the Congress government in Punjab refused to cut the value added tax (VAT) on petrol and diesel, which is the highest among northern states and the third highest in the country. BJP-ruled Maharashtra levies 46.52% VAT on petrol, the highest in the country, followed by Andhra Pradesh (38.82%). Punjab charges 36% on petrol and 17% on diesel, higher than the neighbouring states of Haryana and Himachal Pradesh, and Chandigarh UT.
Punjab Congress president Sunil Jakhar, while announcing the agitation on Monday, had said the state would be willing to forgo a part of its revenue if the Narendra Modi government at the Centre fails to tame the prices. But state finance minister Manpreet Singh Badal ruled out the possibility, saying that the state cannot afford to sacrifice revenue.
“States will have to keep the pressure on the Centre,” Manpreet told HT, adding, “The Union government levies excise duty on petrol and diesel and it increased it nine times between November 2014 and January 2016 to shore up finances as global oil prices fell. The tax we collect on fuel is an important source of our revenue and we expect the Centre to bring down prices.”
‘Cannot afford cut’
Manpreet, who brought a white paper to reveal how the previous SAD-BJP regime left the state with “empty coffers”, said states cannot make all the sacrifices. “Taxes collected by the Centre are higher than what all states collect together. We need funds for health, education and other expenses. We are writing off farm loans too without any help from the Centre,” he contended.
After a Rs 2 cut in October last year, the central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 on diesel. Union finance minister Arun Jaitley had nudged states governments to cut VAT on petrol and diesel to provide relief to consumers, saying that they get all of the VAT collection plus 42% of central excise collections. Six BJP-ruled states had slashed their taxes, including Himachal which cut it by one percentage point to bring it down to 26% on petrol and 15% on diesel. Chandigarh slashed its VAT by five points, to 11% on diesel and 19% on petrol. Haryana had not followed suit but its 26% VAT on petrol and 16% on diesel is much lower than that in Punjab.
‘Lower VAT will increase sales’
Punjab’s petroleum dealers contend that the state is, in fact, losing revenue due to the high taxes. “Higher tax in Punjab is leading to smuggling of fuel from neighbouring states and Chandigarh (where it costs less). The state is losing revenue and we are losing business. But Punjab’s economy literally runs on the VAT on fuel. Bringing these fuels under the goods and services tax (GST) is the only way to end the regional disparity,” JP Khanna, chairman of Punjab Petroleum Dealers Association, said.
The dealers had gone on a hunger strike in January to seek a cut in VAT and had ended it after getting the state government’s assurance to “rationalise” the tax. They had pegged the notional revenue increase at Rs 4.8 crore per day and nearly Rs 2,000 crore a year if Punjab reduced its VAT on petrol to 25%, as that, they said, would increase sales.
Retail price of petrol depends on cost of crude oil, customs duty, excise duty, and VAT. While announcing the agitation, Jakhar had alleged that the crude oil prices were even higher during the Congress-led UPA regime at the Centre, yet the retail prices were lower.
HEADLINE: Varying VAT
Intro: Central excise duty on the fuels is Rs 19.48 a litre on petrol, Rs 15.33 on diesel; here’s the value-added tax that states levy:
State Petrol Diesel
Punjab 36% 17%
Himachal 26% 15%
Haryana 26% 16%
Chandigarh 19% 11%