MUMBAI: The Maharashtra government has slashed fuel prices following the central government slashed fuel prices. The Shiv Sena-Congress-NCP government has also announced a tax cut. The VAT has been reduced to Rs 2.08 per liter for petrol and Rs 1.44 per liter for diesel. The state government claims that the decision will result in a tax cut of Rs 2,500 crore in the state.
Meanwhile, the excise duty on petrol was reduced by Rs 8 per liter and diesel by Rs 6 per liter yesterday. With the reduction of central tax, VAT in Kerala was reduced proportionately. In Kerala, petrol price has been reduced by Rs 10.52 per liter and diesel by Rs 7.40 per liter. Apart from the proportional reduction, Kerala is not ready to reduce taxes further.
With the reduction in value added tax, the Maharashtra government’s monthly revenue from petrol sales will be reduced by Rs 80 crore. Revenue from diesel sales will fall by Rs 125 crore per month. The central government cut taxes yesterday. With this, petrol and diesel prices in the domestic market have come down from today. Petrol price has been reduced by Rs 9.50 per liter and diesel by Rs 7 per liter.
Kerala will not reduce fuel prices; Finance Minister KN Balagopal clarified his position
At the same time, Kerala is adamant that it will not reduce fuel prices. This was reiterated by Finance Minister KN Balagopal in a Facebook post. He said that Kerala’s demand for reduction in petrol and diesel prices was once morest the interest of the people of the state. The state finance minister also demanded that the central government should reduce the price of fuel, recognizing its huge increase in fuel tax in a short span of time.
KN Balagopal’s Facebook post
The central government has been forced to reduce taxes on petrol by Rs 8 and diesel by Rs 6 a liter due to skyrocketing prices of essential commodities, including essential commodities. This is a welcome move, but the central government has reduced the tax, which has been steadily increasing since 2014, in the event of non-compliance.
During March and May 2020, the Center had hiked taxes on petrol by Rs 13.32 and diesel by Rs 17.97. Now this increase has actually been reduced. But when the BJP government came to power in 2014, the central tax was only Rs 9.48 per liter for petrol and Rs 3.56 per liter for diesel. Even following the current exemption, the central petrol tax is two times higher than that of 2014 and four times that of diesel.
When the Center reduced the tax on diesel by Rs 10 and petrol by Rs 5 on November 4, 2021, the actual reduction in Kerala was Rs 12.30 for diesel and Rs 6.56 for petrol. Of this, Rs 2.30 per liter for diesel and Rs 1.56 per liter for petrol is the lowest in Kerala. At present, as a result of the central tax cut, Kerala will get a reduction of Rs 2.41 per liter in petrol tax and Rs 1.36 per liter in diesel. In that form, following November 2021, Kerala reduced the tax on petrol by Rs 3.97 and diesel by Rs 3.68. The tax cut in Kerala should not be underestimated as a mere proportional reduction. Instead, it has to be said that due to the uniqueness of our tax structure, the tax rate has been reduced in Kerala as well.
But let us also look at the state tax hikes made during the last Oommen Chandy government from September 2014 onwards. It was $ 99.96 in September, $ 86.83 in October, $ 77.58 in November, $ 61.21 in December and $ 46.59 in January 2015. Crude oil prices were at an all-time low. What did the Oommen Chandy government do instead of giving the people the benefit of the doubt?
Petrol tax has been increased 13 times.
From February 2015, crude oil prices began to rise once more. Instead of providing relief to the people, the then UDF government in February 2015 increased the state petrol tax to 31.80 per cent and the diesel tax to 24.52 per cent.
But since the LDF came to power in 2016, Kerala has not increased the fuel tax. In June 2018, the LDF government reduced the tax rate on petrol from 31.80 per cent to 30.08 per cent and on diesel from 24.52 per cent to 22.76 per cent.
During the Kovid period, UP, Goa, Haryana, Chhattisgarh, Karnataka and Assam raised fuel taxes while Kerala was one of the few states that did not raise taxes. During the Kovid period, Assam increased petrol prices by 5 per cent and diesel by 7 per cent. Goa 10 and 7 per cent, Karnataka 5 per cent, Manipur 15 per cent and 12 per cent, Tripura 8 per cent and 6 per cent.
Fuel prices have been steadily rising for the past several years. There are three main reasons for this. One is that the power to set fuel prices is left entirely to the market. In the case of petrol, the UPA government was the one that left the diesel price to the NDA government. In doing so, prices in India should change in proportion to the actual change in international prices. But that is not happening. Whenever international prices fell, the central government introduced new types of taxes and increased them several times. That is the second reason. The third reason is that the BJP government, which came to power in 2002, stopped controlling petroleum prices through the oil pool account system.
In October 2018, when the crude oil price was $ 80.08, the central excise duty on petrol was Rs 17.98. By March 2020, crude oil prices had fallen to $ 33.36 a barrel. During this period, the Central Government increased the Central Duty and Cess to Rs. 22.98, which should have been kept or reduced without any change in tax. In May 2020, crude oil prices fell once more to $ 30.61. It was then that the Center raised the tax to an all-time record. That is Rs 32.98 in one go.
In Kerala, the fuel tax has never been increased despite the increase in Kovid related expenses and the increase in spending on public health, welfare, food security and free treatment than in any other state.
There are many other figures that we forget when we repeat that Kerala wants to reduce fuel prices once more. The government is spending over Rs 20,000 crore on the Kovid package. It has been decided to give Rs 5,000 per month to the BPL families who died due to Kovid for three years. There will be no other state that spends more than Rs 10,000 crore on social security pensions. Thousands of crores of rupees are being spent to protect public sector enterprises like KSRTC. Kerala spends more on public education and public distribution than any other state.
In addition to this, Kerala’s current revenue from central share, GST compensation and revenue deficit grant will be reduced by over `19,000 crore this financial year. The Center has now introduced stricter restrictions on borrowing from the market.
Thus, on the one hand, the sharp fall in the central share, and on the other hand, the rising cost of social welfare activities undertaken by the Government of Kerala, those who insist that Kerala should once more be tax-exempt should, in fact, recognize the central position which has led to a drastic increase in taxes for a short period of time and demand that the Center levy the excess tax once more. In fact, it is once morest the interests of the state and the people that Kerala is demanding further reduction in taxes on petrol and diesel.
An important point to note is that the reduction in petrol and diesel taxes is only a temporary solution to the price hike, both central and state. Even following the central and state governments reduced prices on November 4, 2021, prices in the market continued to rise at an unprecedented rate. This proves that a permanent solution to this problem cannot be found without controlling prices through any mechanism such as an oil pool account.
Last Updated May 22, 2022, 10:03 PM IST
