Tamil Nadu CM MK Stalin hits out at PM Narendra Modi over fuel tax cuts

Training guns on Prime Minister Narendra Modi over the issue of tax cuts on petroleum productsTamil Nadu Chief Minister MK Stalin on Thursday said people were aware of the fact behind the issue and pointed to his government effecting a Rs 3 a litre cut on petrol earlier.

Since 2014, whenever international crude rates dipped, the NDA government did not pass on the benefit to the customers but only pocketed the additional revenue earned from the differential, he said replying to an issue raised by Congress legislature party leader K Selvaperunthagai in the Assembly on the PM’s virtual meeting with the state chief ministers.

“The Prime Minister had said some states were not cooperating with the Center in its efforts to reduce the fuel prices and attributed the reasons for the rise in the price to the states as they are not reducing their taxes.
To comment on it in one line: it is like concealing a pumpkin in a handful of rice,” the CM said referring to the Tamil saying (Muzhu poosanikkayai sothla maraikiradhu) indicating that the PM was not revealing the facts.

While the excise duty levied on petrol and diesel has to be shared with states, that has been reduced, thus affecting the states’ revenue, he said.

“While the cess and surcharges are not meant to be shared with the state governments, these have been exorbitantly hiked, thus burdening people and the union government is enjoying the revenue earned from this,” the CM added.

He also accused the Center of “pretending” to have reduced the fuel-related taxes due to “elections in some states,” in an apparent reference to the polls held earlier this year in five states, including Uttar Pradesh and Goa.

He charged that a week after the state elections, the prices were hiked and the Union government imposed further burden on people.

However, soon after winning the elections and forming the government last year, unmindful of the fiscal position, and according to priority to people’s welfare, his government had effected the tax cut for petrol even before Center did, Stalin pointed out.

“People are aware of this. Who shows real keenness in reducing petrol rates and who pretends and lays the blames on others–I leave it to the people to decide,” Stalin said.

He also referred to state Finance Minister Palanivel Thiaga Rajan issuing a detailed “data-based” statement on the issue earlier in the day.

Palanivel Thiaga Rajan said the taxes on fuel prices levied by the Center continue to be “exorbitant” and it was neither ‘fair’ nor ‘feasible’ for the State to further reduce it.

On Wednesday, Modi had pointed out that some states did not reduce VAT on petrol and diesel despite the cut in excise duty by the Center last November.

He said the states had done “injustice” to the people by not transferring the benefits of the cut to them.

Speaking at an interaction with CMs on the emerging COVID-19 situation in the country, Modi said he wanted to flag the challenges being faced by the people due to the war.

“The situation of war which has arisen, has affected the supply chain, and in such an environment, the challenges are increasing day by day,” Modi said in an apparent reference to the Russia-Ukraine conflict.

“This global crisis is bringing many challenges. In such a situation, it has become imperative to further enhance the spirit of cooperative federalism and coordination between the Center and states,” he said.

Rajan, in a statement on Thursday, referred to the Tamil Nadu government’s cut on the Value Added Tax in August 2021 which resulted in a relief of Rs 3 per litre soon after his party assumed office in May 2021.

Continuing his tirade on the Center that the levies on petrol increased substantially in the past seven years, Rajan said though the revenue to the central government increased ‘manifold’ there was no matching increase in the revenues of the states.

“This is because the Union Government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the states.”

The Minister recalled that in August 2014 the basic price of petrol was Rs 48.55 per litre while diesel was Rs 47.27 per litre. The central government taxes were Rs 9.48 per litre on petrol and Rs 3.57 per litre on diesel. The state government taxes were at Rs 15.67 per litre on petrol and Rs 10.25 per litre on diesel, he noted.

Following the reduction of taxes by the Center in November 2021 at Rs 5 per litre on petrol and Rs 10 per litre on diesel, the union government still levies an additional tax of Rs 18.42 per litre for petrol and Rs 18.23 per litre on diesel, he pointed out.

The Tamil Nadu government levies taxes of Rs 22.54 per liter on petrol and Rs 18.45 per liter on diesel and after the introduction of the Goods and Services Tax (GST), the states have ‘lost substantial powers’ to levy their own taxes and raise revenue , he said.

The COVID-19 further burdened the state with finances being ‘everely affected’ and also incurring large-scale additional expenditure towards providing COVID relief, he said.

Noting that the GST compensation regime comes to an end by June 30 and several states including Tamil Nadu have requested the compensation to be extended, he said there was no clarity from the Center on it would be extended or not.

DMK have been ardent proponents of “co-operative federalism” and have been practising it from the days of (former Chief Minister) Anna, Kalaignar (the late DMK patriarch M Karunanidhi) and continue to do so under present Chief Minister MK Stalin, he said.

“We have repeatedly urged the Union government to reduce the cess and surcharges being levied and merge them with the basic tax rates so that states get their rightful share from the proceeds of the union taxes,” he said.

“Given that the Union government’s taxes continue to be exorbitant, it is neither fair nor feasible for the state government to further reduce taxes. We reiterate that the sole, simple and fair approach for the Center is to remove the levy of cess and surcharges and revert to the rates that prevailed in 2014,” he said.

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