AMID an outcry over record high petrol and diesel prices, Union Finance Minister Nirmala Sitharaman on Saturday said the Centre and State Governments will have to together work out a mechanism to bring retail rates to reasonable levels. As much as 60 per cent of the retail price of petrol, which shot above Rs 100-mark in some places in Rajasthan and Madhya Pradesh and is at an all-time high elsewhere in the country, is made up of Central and State taxes. Taxes make up for about 56 per cent of the record high diesel rates.
Sitharaman, who had increased central excise duty on petrol and diesel by a record margin last year to mop up gains arising from international oil prices plunging to two- decade low, remained non-committal on cutting taxes to give relief to consumers. “This is a very vexatious issue. An issue in which no answer except reducing the price (of fuel) will convince anyone. I know I am treading on an area and whatever I may say, to bring in the reality into picture, will only sound like I am obfuscating.”
“I am avoiding my answer. I am shifting the blame,” she said addressing a gathering at an event organised by the Chennai Citizens’ Forum here. She went on to explain the tax structure and how production cuts by oil cartel OPEC and its allies had led to a rally in the international oil prices, leading to a hike in retail rates in India. She, however, said the answer may lie in bringing petrol and diesel under the Goods and Services Tax (GST) regime, which will end the cascading impact of taxes and bring uniformity. Currently, the Central Government levies a fixed rate of excise duty while states levy different rates of VAT.
Under GST, the two would merge and bring uniformity, solving the problem of fuel rates being higher in states with higher VAT. “What I am saying is that this is a vexatious issue and no Minister can ever convince anybody because Indians being Indians and I am one of them, (will not be convinced),” she said. “It is a matter of fact that both Centre and States will have to talk.” Stating that the States levy ad valorem rates of sales tax or VAT which help them get more revenue whenever prices go up, she said it won’t serve any purpose if the Centre were to take the moral high ground and bring down excise duty to zero.