New Delhi: A review of the Covid pandemic in the light of a fresh spurt in infections by Prime Minister Narendra Modi turned into a platform for political oneupmanship as Opposition-ruled states were targeted for not cutting taxes on petrol and diesel.
The Prime Minister urged the Opposition-ruled states to “work as a team” and, “in the spirit of cooperative federalism”, reduce the fuel tax and provide relief to the people.
Not only did PM Modi single out Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand and Tamil Nadu for not providing relief to the people despite the central government reducing the excise duty last November, he also listed a fact sheet on the cost of petrol in some of the Opposition-ruled states.
During his interaction with chief ministers, Modi also said coordination between the states and the Centre was more important than ever while taking economic decisions, and necessary for strengthening India’s economy in today’s global conditions.
The PM’s comments come in the background of soaring inflation, which hit a 17-month high of 6.95 per cent in March, largely due to high fuel and food prices.
Opposition leaders, meanwhile, are hitting back at the PM. In a Twitter thread, Congress leader Randeep Singh Surjewala asked Modi to roll back the excise hike in petrol and diesel.
Excise Duty during –
Petrol – ₹9.48/litre
Diesel – ₹3.56/litre
Petrol – ₹27.90/litre
Diesel – ₹21.80/litre
Pl Roll Back the Excise Hike of ₹18.42 in Petrol & ₹18.24 per litre in Diesel.
— Randeep Singh Surjewala (@rssurjewala) April 27, 2022
Maharashtra Chief Minister Uddhav Thackeray has also claimed in a statement that “it’s not a fact that the prices have become more expensive due to states”.
‘Some states did injustice’
PM Modi accused some states of doing “injustice” to the people by not reducing tax on petrol and diesel.
“In order to reduce the burden of rising prices of petrol and diesel, the central government had reduced the excise duty last November. The Centre had also urged the states to reduce the tax and transfer the benefit to the people. After this, some states reduced taxes but some states did not provide any benefit from this to the people of their states,” Modi said.
Due to this, the PM added, “the prices of petrol and diesel in these states continue to remain high compared to others. In a way, this is not only an injustice to the people of these states but it also impacts the neighbouring states”.
Claiming that he was “not criticising anyone”, Modi then named the states that had failed to heed the Centre’s requests to provide relief to the people by reducing tax.
“Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand, Tamil Nadu for some reason or the other did not pay heed to the words of the central government and the burden on their citizens kept increasing. I request that what they should have done in November, they should at least reduce the VAT and pass on the benefit to the citizens,” he said.
The Prime Minister further said he did not wish to engage in a debate about how much these states earned in terms of revenue in the past six months, but merely wanted the people to be provided benefits.
Referring to the Russia-Ukraine war and its effects on global supply chains, Modi said that in such a “difficult and challenging situation” it was “imperative for states and the Centre to work in the spirit of cooperative federalism”.
Praise for BJP-ruled states
Heaping praise on BJP-ruled states like Gujarat and Karnataka, Modi said they took the “positive step” of reducing taxes even if it came with revenue loss.
“If Karnataka had not cut taxes, it would have collected more than Rs 5,000 crore in additional revenues during the last six months. Gujarat would also have collected Rs 3,500-4,000 crore more,” he said.
The PM also took a dig at the states “neighbouring” Gujarat and Karnataka, like Maharashtra, for not cutting taxes and earning additional revenues in the range of Rs 3,500 crore-5,000 crore in the past six months
Opposition leaders hit back about GST, VAT
In a press statement, Congress spokesperson Pawan Khera pointed out that the Centre did not give GST share to the states.
“[Modi] earned Rs 26 lakh crore out of central excise on petrol and diesel. Has he shared it? You didn’t give the GST share to the states on time and then you ask states to further reduce VAT. He should reduce central excise and then ask others to reduce VAT,” Khera said.
At the meeting, Maharashtra CM Uddhav Thackeray complained about the Centre’s “step-motherly” treatment to the state, saying it gets only 5.5 per cent of central taxes even though it contributes 38.3 per cent to direct taxes and 15 per cent to the country’s GST revenue.
“Despite that, even today, the state is waiting to get Rs 26,500 crore worth of its GST revenue,” CM Thackeray said, according to a statement issued by the CM’s office.
He also rejected the Centre’s contention that petrol and diesel are costly because of states’ policies.
“Today, in Mumbai, behind every litre of diesel, the Centre’s VAT is Rs 24.38 while the state’s VAT is Rs 22.37. In petrol, Rs 31.58 is the Centre’s tax while the state tax is Rs 32.55. So, it is away from the truth to state that petrol and diesel is costly due to the states,” Thackeray said.
After a roaring demand for a cut in excise duty in 2021, the central government finally relented on the eve of Diwali last year by reducing the excise duty on petrol and diesel by Rs 5 and Rs 10, respectively. Most states, except for some in the Opposition, followed the Centre’s move with a cut in VAT on both the fuels.
Despite the cut, the excise duty is still high at Rs 27.90 per litre on petrol and Rs 21.80 a litre on diesel.
State-owned oil firms — Indian Oil, Bharat Petroleum and Hindustan Petroleum — had paused the hike in fuel prices till after the result of the five state assembly elections concluded on 7 March this year.
Since then, the oil companies have increased the retail prices of petrol and diesel over a 15-day period by Rs 10 each on both the fuels, especially after Russia’s invasion of Ukraine and a subsequent surge in international crude oil prices, which has a bearing on India’s local fuel prices. The last fuel price revision took place three weeks ago.
At present, petrol and diesel are sold at Rs 105.41 and Rs 96.67 a litre, respectively, in the national capital. In Mumbai, the price of petrol is Rs 120.51 a litre and diesel is Rs 104.77 per litre. Prices of the two fuels vary across the country, depending upon state levies.
The price of India’s crude oil basket rose to $100.20 per barrel Tuesday, according to data from the Petroleum Planning and Analysis Cell, as geopolitical tensions escalated after Russia threatened to cut gas supplies to Poland and Bulgaria.
High, sticky inflation expected to continue
India’s inflation rate, as measured by the Consumer Price Index (CPI), rose to a 17-month high of 6.95 per cent in March, primarily due to rise in prices of edible oils and fuel, National Statistical Office (NSO) data showed. This is the third straight month that the headline inflation rate has breached the upper bound of the Reserve Bank of India’s medium-term target range of 2-6 per cent.
Economists estimate the inflation rate to rise in the coming months as the full impact of the rise in global commodity prices will be felt, along with the recent increase in prices of petrol and diesel, in March and April.
Earlier this month, the RBI raised its inflation forecast for 2022-23 to 5.7 per cent from 4.5 per cent estimated in February in the wake of the Russia-Ukraine war, which has reduced the supply of crude in the global market, affecting prices.
The majority of rise in inflation in March was seen due to the spike in food prices, which reflects spillovers from rising global food prices on items like edible oils and cereals. Overall, the consumer food price index increased 1.4 per cent, with an increase in “meat and fish” by 5 per cent and “oils and fats” by 5.3 per cent.
(Edited by Asavari Singh)