The Centre, which had resisted pressure from multiple sources to reduce the excise duty on fuel, suddenly seems to have gone on an overdrive in its efforts to provide some succour to consumers. According to sources, after it cut excise duty on petrol by ₹5 a litre and on diesel by ₹10 a litre, the Centre nudged several States to do their bit. A top Union Minister personally rang up chief ministers, even in Opposition-ruled States, to cut VAT rates, they added.
While this led to the BJP and its allies-ruled States witnessing steeper reductions in petrol and diesel prices — petrol price plummeted by as much as ₹8.7 and diesel by ₹9.52 a litre in 22 States and Union Territories as they matched the Centre’s announcement of a cut in excise duty with slashing of local sales tax (VAT) rates — the Opposition-ruled States such as Maharashtra, Delhi and West Bengal seem to have resisted cutting their share, according to a price chart of different locations prepared by State-owned oil firms.
Aggressive counter
While the Centre showcased the reduction in fuel prices as a result of the excise cut in most BJP-ruled States, the most aggressive counter came from the Chhattisgarh Chief Minister Bhupesh Bhagel. In a written response from Raipur, the Chhattisgarh CM told
Kerala Finance Minister KN Balagopal blithely said the Centre had no right to impose such a high additional excise duty on petrol and diesel to begin with. “If the Centre reduces the additional excise, customs duties and other cess on petrol and diesel, the prices will automatically come down,” he said.
Revenue-share implications
The Centre had lowered road and infra cess to ₹13 from ₹18 on petrol and to ₹8 from ₹18 on diesel. Since the Centre has cut cess, this means no change in revenue-share implications with the States. The Centre will distribute 41 per cent of ₹12.40 per litre among States for unbranded petrol and of ₹9.80 a litre for diesel. However, as States/UTs calculate VAT on the basis of base price plus central levies, even if they do not lower duty, prices will come down as the base has reduced. As VAT rates differ from State-to-State, there are differential rates of fuel across provinces.
After duty changes, the costliest petrol is sold in Rajasthan at ₹111.10 a litre (Jaipur), followed by Mumbai (₹109.98) and Andhra Pradesh ( ₹109.05). The fuel is below ₹100-a-litre-mark in most BJP-ruled states, barring Karnataka (₹100.58), Bihar ( ₹105.90), Madhya Pradesh (₹107.23) and Ladakh (₹102.99).
Similarly, the costliest diesel is now sold in Rajasthan at ₹95.71 a litre (Jaipur), followed by Andhra Pradesh ( ₹95.18) and Mumbai ( ₹94.14). The cheapest diesel is in Mizoram at ₹79.55 a litre. The additional reduction, on top of the excise duty cut, is the lowest in Uttarakhand because of lower duty cuts and the highest in UT of Ladakh. In Punjab, State Finance Minister Manpreet Singh Badal said the Government will take a decision on the demand to reduce the tax in the next meeting of Cabinet on Tuesday.
Tamil Nadu, which was among the first States to cut VAT on fuel, appeared to be re-thinking that policy. “We are the only State till now to cut the tax on petrol this year. There have been two sides to the debate. The experts in the Council said with only one State cutting the tax, people from other States can cross borders and take advantage. Tamil Nadu has one of the highest vehicle traffic,” said TN Finance Minister Palanivel Thiaga Rajan on Monday.
In West Bengal, the State government officials only went to the safe extent of saying that “all options are being explored”.
With inputs from our bureaus in Tamil Nadu and West Bengal