Finance Minister Arun Jaitley provided no indication today of any cut in excise duty on petrol and diesel to cushion the spike in rates, saying that the government needs revenue to support public spending without which growth will suffer. States levy a high amount of sales tax or VAT on fuel, he said without referring to the Rs 11.77 per litre hike in excise duty on petrol and Rs 13.47 a litre on diesel between November 2014 and January 2016 which took away gains arising from plummeting international oil rates.
BJP-ruled Maharashtra levies 46.52 per cent VAT (47.64 per cent in Mumbai) on petrol, the highest in the country. Andhra Pradesh has 38.82 per cent VAT on petrol while BJP-governed Madhya Pradesh levies 38.79 per cent VAT on the fuel. BJP-led NDA governs 18 out of the 29 states. Jaitley said however that the fuel prices will settle down soon.
“You should remember that the government needs revenue to run. How will you build highways?,” he said. “The government has increased public spending on infrastructure… Whatever (GDP) growth is there, it is fueled by public spending and FDI. If public spending is slashed, it will mean cutting down expenditure on social sector scheme.” There is hardly any private investment, he said.
He was responding to questions from reporters at the weekly Cabinet meeting on whether the government would consider cutting excise duty. Petrol price has risen by Rs 7.44 per litre since early July to cost Rs 70.52 a litre in Delhi, the highest in three years. Diesel rates have gone up by Rs 5.35 to Rs 58.79 a litre in Delhi.
As much as Rs 21.48 per litre in price of petrol in Delhi is due to excise duty and another Rs 14.99 is due to VAT. “You have to consider many factors. The hurricane in the US, the refining capacity has been impacted to a large extent. Due to this there is demand supply mis-match, there is a temporary spike,” he said on the reasons for the recent rise in rates. Jaitley said that of the tax that central government collects from petroleum product, 42 per cent goes to states. “Then Congress and CPM government should say they don’t need taxes from that,” he said. He asked how much tax was opposition ruled state levying.
“You should remember, when oil prices used to be reviewed on fortnightly basis two years ago, government in Delhi, Haryana, Punjab and Himanchal Pradesh used to increase the VAT with the same quantum with which petrol prices used to be reduced in the review,” he said. Haryana has been under BJP rule since 2014 and BJP-Akali Dal alliance was in government in Punjab till March this year. Delhi and Himachal Pradesh levy 27 per cent VAT on petrol while Punjab has 36.04 per cent VAT. Haryana levies 26.25 per cent VAT.
The government in June junked 15-year practice of fortnightly revision in rates and moved to daily changes in petrol and diesel in line with international oil movements. On the fuel price hike fueling inflation, he said the rate of inflation was 10-11 per cent during the government of those people who today are making noise on inflation.
“Today at 3.36 per cent they are making noise,” he said, adding that the statutorily fixed monetary policy target for inflation is 4 per cent and the current rate was less than that. Jaitley said that during the monsoon period, vegetable prices generally go up. “This is spike period. When it is 3.26 per cent in the spike period, it is under control as per the traditional Indian standard.”