‘Better than nothing’ say Opposition leaders to reduction in duty on petrol and diesel

The confusion caused by Finance Minister Nirmala Sitharaman on Saturday was finally resolved on Sunday as the notification clarified that the reduction announced by the FM is applicable on ‘Additional Excise Duty’ and not ‘Basic Central Excise’. The Additional Central Excise Duty on petrol and diesel goes entirely to the Union Government while basic central excise is shared with states.

For every Rupee collected as Basic Central Excise Duty, the Centre appropriates 59 paise while the remaining 41 paise go to the states. Finance Minister Nirmala Sitharaman on Saturday caused some confusion by claiming the reduction was being made in ‘excise duty’ and not ‘additional excise duty’.

But even as the confusion was cleared and the Prime Minister sanctimoniously declared that for his government, it is always ‘people first’ and while Home Minister Amit Shah and BJP chief ministers rushed in to congratulate the ‘sensitive’ and ‘visionary’ Prime Minister for slashing prices, it was left to the opposition to point out that even after the reduction in duty, prices of petrol and diesel would still remain at a higher level than where they were two months ago. While duty on both petrol and diesel had gone up by Rs 10 per litre in the last two months, the reduction announced on Saturday is less.

The FM not too long ago had justified duty hike on fuel and had ruled out possibility of any reduction. But obviously concerned over the negative feedback from the ground on high prices and the impending Gujarat Assembly election, the decision to reduce duty was taken, as is now usual, at the PMO. What however remains unclear is how much relief it would provide to the consumer and how soon will the reduction register in transporation costs and then get reflected in the prices of edibles and other goods.

What is also not clear is the ability of the states to reduce VAT on fuel. While the BJP is seeking to make a virtue out of necessity and daring the states to match its alleged generosity and largeness of its heart, the opposition and opposition ruled states remain unimpressed.

However, TV channels which had been conspicuously silent on inflation and price rise, broke their silence on Saturday and hailed the reduction, discussing during prime time how big a relief it was for the consumers.

Tamil Nadu’s Finance Minister P. Thiaga Rajan tweeted, “The Union Government didn't inform, let alone ask for any state’s view when they increased Union taxes on Petrol ~23 Rs/ltr (+250%) & Diesel ~29 Rs/ltr (+900%) from 2014. Now, after rolling back ~50% of their increase, they're exhorting states to cut (VAT). Is this Federalism?”

Former Union Finance Minister P. Chidambaram also took to Twitter on Sunday to correct his earlier impression. “The notification on reduction of duty on Petrol and Diesel is now available FM used the words ‘Excise Duty’, but the reduction is in Additional Excise Duty which is not shared with the states. Hence, contrary to what I said yesterday, the entire burden of the reduction falls on the Centre. To that extent, I stand corrected The states are getting very little by way of share of duties on Petrol and Diesel. Their revenue is from VAT on Petrol and Diesel. I wonder if they can afford to give up that revenue unless the Centre devolved more funds or gave them more grants. The situation is like being between “the devil and the deep sea”. He tweeted.

Earlier Congress spokesperson Supriya Shrinate posted a video to explain the fluctuating fuel prices and the duty levied.

Dainik Bhaskar tweeted the following chart to show the increase and reduction in duty on petrol and diesel since 2014.