Dharmendra Pradhan remained non-committal on cutting taxes to soften the blow of relentless rise in prices since July 3. Pradhan said the global prices have risen due to factors like hurricane in the US. The minister also said that GST Council should consider bringing the petroleum products in the ambit of GST.
NEW DELHI: The government will not go back on reforms in the fuel retail market and the daily revision of petrol and diesel prices introduced from June 16 will continue, oil minister Dharmendra Pradhan said on Wednesday amid growing public clamour for a reduction in Central excise to arrest rising pump prices since July.
Petrol has become costlier by Rs 7 per litre since July, pushing pump prices to their three-year high in cities such as Mumbai as high level of state taxes amplified the impact of rise in international prices.
Though Centre and state both make handsome gains from fuel sales, the continuous rise in pump prices has turned the focus on the Centre raising excise duty on nine occasions between November 2014 and January 2016 to keep part of the savings from falling global crude – and product – prices. These hikes pushed up excise duty on petrol by Rs 11.77 per litre and by Rs 13.47 on diesel.
Remaining non-commital on excise cut, Pradhan turned the government’s criticism on its head to make a case for bringing petrol and diesel under GST — something the Centre has been trying hard to do — and indirectly shift the blame on high state taxes.
States are opposed to bringing petrol and diesel under GST as these are their major sources of revenue. In Delhi, which has the lowest state levy among metros, Central excise makes up 30% and VAT 21% of the pump price of petrol.
Pradhan rubbed this in by pointing out that many states have “drastically” increased VAT on petrol – Kerala from 26% to 34%, Maharashtra from 27% to 47% and Delhi from 20% to 27%. He also said 42% of excise collections are transferred to states for infrastructure and welfare schemes.’
Though global crude and product prices have been rising for some time, the recent spike has been stoked mainly by fears of product shortage in the wake of hurricanes Harvey and Irma knocking out 13% of US refining capacity. Contrary to popular belief, crude prices do not have direct bearing on product prices at regional trading hubs and are guided more by global demand and supply situations. That’s why, benchmark price of petrol has risen 18% from $57.42 per barrel in June to $67.85 on September 8. Cost of diesel has increased 20% during this period to $68.32 a barrel.
Terming the spike as temporary, Pradhan said the drop in prices for over a fortnight after the daily price revision was introduced has been ignored and only “temporary” phenomenon of rising trend is being highlighted.
The excise duty hike resulted in the government’s excise mop-up more than doubling to Rs 242,000 crore in 2016-17 from Rs 99,000 crore in 2014-15. The windfall from the excise duty hikes helped the government bridge its budgetary deficit.
Pradhan said all this was spent on welfare schemes for the poor and development projects. “We have to fund massive highways and road development plans, railway modernisation and expansion, rural sanitation, drinking water, primary healthcare and education. Allocations on all these heads has gone up significantly. Where do we get resources for these,” he said.