Rajasthan CM Ashok Gehlot announces relief on oil prices

Ashok Gehlot government has provided relief to consumers by reducing VAT on petrol by Rs 4 and on diesel by Rs 5 per litre, though it will mean suffering a huge loss in the state's annual revenue

Rajasthan CM Ashok Gehlot
Rajasthan CM Ashok Gehlot

Prakash Bhandari

The Ashok Gehlot government of Rajasthan has provided relief to the consumers by reducing the VAT on petrol by Rs 4 and on diesel by Rs 5 per litre. Although it will mean suffering a huge loss of Rs 3500 crore by way of annual revenue.

Chief Minister Ashok Gehlot, who also holds the finance portfolio said the state Cabinet which met on Tuesday decided to give relief to the people who have been subjected to a continuous increase in oil prices because of the Union government’s policy. He said the state earns 22 per cent of its revenue from the VAT and the reduction in the VAT would severely affect the state’s revenue, yet the welfare government has decided to reduce the VAT to help people of Rajasthan. He said the reduction in the VAT is likely to have an impact particularly on consumer items that would cost less now because the reduction in oil prices would also reduce the transportation charges.

Gehlot said the Corona pandemic has severely hit the state’s revenue and the state exchequer received Rs 20,000 crores less revenue till October 2021. He said the state is reeling under a financial crunch as the Union government is yet to reimburse the state Rs 5963 crores towards its share of GST.

The state Cabinet reviewed the state finances and it found that though the Union government has levied special excise duty on oil prices continuously, the states did not get their rightful share from the increase in the additional excise duty. Gehlot said that this attitude of the Modi government was against the spirit of financial federalism.

The Rajasthan Chief Minister said that following the lockdown on May 6, 2020, the Union government increased the excise duty on petrol by Rs 10 per litre and Rs 13 per litre on diesel. This year also the price has been increased by Rs 27 per litre on petrol and Rs 27 per litre on diesel. The Centre has recently announced a relief on petrol by Rs five per litre and Rs 10 on diesel. This reduction in excise duty was insufficient and it would not give any significant relief to the people.

He said that the revenue of the centre is getting benefitted due to an increase in additional excise duty and agriculture infrastructure cess, whereas the basic excise duty which falls in the divisible pool has gradually been reduced resulting in a reduction in the State share of taxes.

Gehlot said that the states have to mobilize necessary financial resources for the development works and social security schemes of the State. The geographical location, economic scenario and local conditions of the States also affect the process of providing the benefits of development schemes to the general public.

He said that the Centre first increased the additional and special excise duty on petrol-diesel and later on reduced it a little and tried to create an atmosphere of mutual competition among states for reducing the VAT which is also contrary to the spirit of Cooperative Federalism.

“In such circumstances, because of the efficient financial management, our Government did not allow the pace of development to slow down. The State Government is ready to fulfil the promises made in our public manifesto and the state budget in a time-bound manner” Gehlot added.

He requested the Prime Minister for early payment of the outstanding amount of GST compensation and to extend the period of GST compensation to states till the year 2027.

Earlier this year, Gehlot had suggested to the Centre that in view of the weak economic situation of the states due to the corona pandemic and due to economic recessions, the period for grant of GST compensation to the states should be increased by five years from June 2022 to June 2027. The state government said that the revenue deficit was caused because of lower than expected GST collections. The state government also demanded that the ratio of the Centre should be increased to 75 per cent in the centrally sponsored schemes.

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