Former Union minister P Chidambaram stated on Sunday that the facts of the central government’s fuel price tax reduction are “contrary” to what he had previously said. On Saturday, Union Finance Minister Nirmala Sitharaman announced an excise duty drop of Rs 8 per litre on petrol and Rs 6 per litre on diesel to bring down surging fuel prices caused by a rise in international crude oil prices due to Russia’s war in Ukraine.
“The notification on reduction of duty on Petrol and Diesel is now available. FM used the words ‘Excise Duty’, but the reduction is in Additional Excise Duty which is not shared with the states. Hence, contrary to what I said yesterday, the entire burden of the reduction falls on the Centre. To that extent, I stand corrected,” Chidambaram said.
The states are getting very little by way of share of duties on petrol and diesel, he said, noting that their revenue is from VAT on petrol and diesel. “I wonder if they can afford to give up that revenue unless the Centre devolved more funds or gave them more grants,” Chidambaram said. The situation is like being between the devil and the deep sea, he said in a series of tweets.
Chimbaram had earlier said the finance minister’s exhortation to states is “meaningless” as 41 paise of a rupee in “central excise” belong to the states. “It means that Centre has cut 59 paise and the States have cut 41 paise. So, dont point fingers,” he wrote on Twitter. “The true cut will be if the Centre cuts from the cess it levies on petrol and diesel (which is not shared with the states).”
Meanwhile, a hoard of political reactions followed suit the announcement. The Tamil Nadu government on Sunday described the Centre reducing taxes on petroleum products as ‘partial’ and said “it is neither fair nor reasonable to expect States to reduce their taxes.”
Tamil Nadu Finance Minister Palanivel Thiaga Rajan said the central government had never consulted states when it increased the taxes and that his state was already incurring loss of over Rs 1,000 crore due to the earlier tax cut announced by the union government in November 2021. Despite the tax reduction announced on Saturday, the rates were still high compared to 2014, he pointed out.
“It is pertinent to point out that the Union had never consulted the States when they increased the taxes on petrol and diesel multiple times. The exorbitant increase in taxes by the Union Government has been only partially reduced through their cuts and the taxes continue to be high as compared to the 2014 rates.” “Therefore, it is neither fair nor reasonable to expect States to reduce their taxes,” he said in a statement, in response to Union Finance Minister Nirmala Sitharaman announcing a reduction in excise duty on petrol by a record Rs 8 per litre and that on diesel by Rs 6.
Thiagarajan further said it was ‘heartening’ to note the Centre has “finally heeded to the repeated requests of the Tamil Nadu Government to reduce the taxes on petrol and diesel, which were egregiously increased by the Union
Government from 2014 to 2021.”
“We will consider,” says Karnataka CM
Karnataka Chief Minister Basavaraj Bommai on Sunday said his government will consider further cut in fuel tax. Speaking ahead of his visit to the Swiss ski resort town of Davos, to take part in the World Economic Forum’s Annual Meeting, he expressed confidence about attracting more investments into the state.
“The decision (Centre’s) has come on Saturday night, let’s see, we will consider it,” Bommai told reporters here in response to a query on any decision from the state government to further reduce petrol and diesel rates, following the Centre’s decision.
Bowing to public pressure, Finance Minister Nirmala Sitharaman on Saturday announced a Rs 8 per litre cut in excise duty on petrol and Rs 6 a litre on diesel to avoid increase in fuel prices that were necessitated due to surge in international oil prices. Also, the government will give Rs 200 per cylinder subsidy to Ujjwala Yojana beneficiaries for 12 cylinders in a year to help ease some of the burden arising from cooking gas rates rising to record levels.
Thanking PM Modi and Sitharaman, the CM in a tweet late Saturday night said, “Price of petrol to reduce by Rs 9.5/litre & diesel by Rs 7/litre…..This measure will be a huge boon to our women folk. Our government is of the people’ & for the people’. This is a pro people decision.”
Congress Slams BJP
The Congress on Saturday accused Finance Minister Nirmala Sitharaman of “befooling” people after she announced an excise duty cut on petrol and diesel and said people needed relief instead of ”jugglery of figures”. Congress chief spokesperson Randeep Surjewala said the government had increased the excise duty on petrol by Rs 10 in 60 days and is now “duping” people by reducing it by Rs 9.50. The opposition party demanded that the finance minister show courage and roll back excise on petrol and diesel to the level it was under the UPA in May 2014.
“Dear FM … in 60 days, you increased the price of petrol by Rs 10/litre and now reduced it by Rs 9.50/litre. … U increased the price of Diesel by Rs 10/litre and now reduced it by Rs 7/litre. Stop befooling people!
“Nation doesn”t need jugglery of figures to dupe the people, Nation doesn’t need Jumlas, Nation needs rollback of excise on petrol and diesel to May 2014 levels of Rs 9.48/litre on petrol and Rs 3.56/litre on diesel. Stop deceiving, Show the courage to give relief,” Surjewala said in a series of tweets.
The Congress leader said in May 2014, excise duty on petrol was Rs 9.48/litre. “It is still Rs 19.90 versus Rs 9.48 during the Congress,” he said. On excise duty on diesel, he said, “It is still Rs 15.80 versus Rs 3.56 during Congress.”
Kerala Welcomes Decision
The Kerala government on Saturday announced a cut in tax on the prices of petrol and diesel by Rs 2.41 and Rs 1.36 per litre respectively, following reduction of fuel price by the Centre. Announcing the cut on state tax, Kerala Finance Minister K N Balagopal said the Union government has partially reduced the huge tax imposed by it. He, however, welcomed the Centre’s decision.
“The Union government has partially reduced the huge tax on petrol and diesel. Kerala government welcomes this decision,” Balagopal said in a statement. “…state government will reduce state tax on the price of petrol and diesel by Rs 2.41 and Rs 1.36 per litre respectively,” he said.