Chennai: Tamil Nadu Chief Minister M.K. Stalin and Finance Minister Palanivel Thiaga Rajan on Thursday April 28 blamed the BJP-led central government for hiking the petrol and diesel prices.
Speaking in the state Assembly, Stalin said as the excise duty has to be shared with the state, the Central government reduced that while hiking the cesses and surcharges which are not shared with the states.
The two Ministers were responding to Prime Minister Narendra Modi’s call on Wednesday to states to reduce the Value Added Tax (VAT) on fuel “in the spirit of cooperative federalism”.
Modi on Wednesday lit the fuse citing the Central government reducing petrol and diesel prices by Rs 5/litre and Rs 10/litre, respectively, while many states have not followed suit.
Stalin said hiking the cesses and surcharges the Central government increased the burden on the common man while earning for itself lakhs of crore of rupees.
As per the figures of Petroleum Planning and Analysis Cell (PPAC), the total contribution of the petroleum sector to the central exchequer galloped from Rs 172,065 crore in 2014-15 to Rs 419,884 crore in 2020-21 and for the nine month period in FY22, it was Rs 310,155 crore.
On the other hand, the state’s revenue went up from Rs 160,554 crore in FY15 to Rs 217,650 crore in FY21 and Rs 207,658 crore for the nine month period in FY22.
“While both, the Central and the state governments, say that they get the revenue for investments in infrastructure, the PPAC figures show that the Central government has further leeway to reduce the rates,” an industry official told IANS on the condition of anonymity.
According to Stalin, owing to some state elections, the central government reduced the oil prices and after winning the polls, the prices were hiked fast.
Meanwhile Rajan urged the Centre to remove cesses and surcharges on petrol and diesel revert to the 2014 rates, an act which is fair and simple.
“We have repeatedly urged the Union government to reduce the cesses and surcharges being levied and merge them with the basic tax rates so that states get their rightful share from the proceeds of the Union taxes,” Rajan said.
According to Rajan, since Tamil Nadu levies ‘ad valorem’ taxes which are applied after Central taxes, this move by the Centre will cause an additional loss of about Rs 1,050 crore in annual revenue to the state.
“Given that the Union Government’s taxes continue to be exorbitant, it is neither fair nor feasible for the State Government to further reduce taxes.”
He hoped that the Central government would heed to this reasonable request in the “true spirit of cooperative federalism”.
He said the Centre’s levies on petrol have gone up substantially in the past seven years since Modi took charge for the first time in 2014.
Listing out the basic points and the tax rates on petrol and diesel, Rajan said on August 1, 2014, the basic price was Rs 48.55 per litre for petrol and Rs.47.27 per litre for diesel.
On November 4, 2021, the basic price of petrol was Rs 48.36 per litre while that of diesel was Rs 49.69 per litre.
On August 1, 2014, the Centre’s taxes were Rs 9.48 per litre on petrol and Rs 3.57 per litre on diesel. At that time, the state government taxes were at Rs 15.67 per litre on petrol and Rs 10.25 per litre on diesel.
“Prior to the reduction of taxes on petrol and diesel by Union Government, the levy of tax, including cesses and surcharges by Union Government on petrol was Rs 32.90 per litre and Rs 31.80 per litre on diesel,” he said.
“This has been reduced to Rs 27.90 per litre for petrol and Rs 21.80 per litre for diesel after the cut. So, when compared to 2014 (when basic price was roughly the same), the Union government still levies an additional tax of Rs 18.42 per litre for petrol (an increase of roughly 200 per cent) and Rs 18.23 per litre for diesel (an increase of over 500 per cent) compared to the taxes in effect when it took office in 2014.
“Though the revenue to the Union government has increased manifold, there has not been a matching increase in the revenues to States. This is because the Union government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the states.
“In 2020-21, the revenue to the Union government from levies on petrol and diesel was Rs 3,89,622 crore which was 63 per cent higher than the revenue of Rs 2,39,452 crore in 2019-20. On the other hand, the government of Tamil Nadu in 2020-21 received only Rs 837.75 crore as share of the tax devolution from the Union Excise Duties on petrol and diesel as against the Rs 1,163.13 crore received in 2019-20,” the Minister added.
According to Rajan, after the advent of the Goods and Services Tax (GST) regime, the states have lost substantial powers to levy their own taxes and raise revenue.
“Further, the GST compensation regime comes to an end on June 30 and most states including Tamil Nadu have already requested the compensation to be extended considering the strain caused by the pandemic on state finances. However, there is no clarity from the Union government on whether the compensation will continue or not after June 30.”
On bringing petrol and diesel under the GST regime, Rajan had earlier said it can be done provided the Central government scraps the cess and surcharge levied on them.
On the other hand, AIADMK’s late Chief Minister J. Jayalalithaa was a strong advocate for changing the fuel pricing formula.
She had argued that the fuel rates should be determined based on import costs and refining charges and rates of domestic crude oil and the refining charges for the same instead of basing it on trade parity Price.
