Thiruvananthapuram: Fuel prices are unlikely to go down in Kerala as the State badly needs the tax revenue earned from their sales. With the precarious financial condition of the State, the government can ill afford to reduce the sales tax it imposes as the prime minister urged the other day.
The prices of petrol and diesel would fall by around Rs 2 per litre in Kerala if the state government reduces the sales tax on these fuels.
When the oil companies, which are under the Central Government, increased fuel prices by over Rs 10 after the recent elections to five state assemblies, Kerala started earning additional revenue of over Rs 20 crore every month.
As per data, 18 lakh litres of petrol and diesel are sold each day in Kerala. During the latest hikes, the price of petrol went up by Rs 10.89 and diesel Rs 10.52 per litre. Of these amounts, the state earns Rs 2.60 per litre for petrol and Rs 1.97 for diesel, which political opponents of the Left Democratic Front (LDF) government in Kerala wants it to forgo.
But the state is firm about not touching the fuel prices as it facing a serious financial crisis. According to Kerala’s Finance Department, revenue would be insufficient to meet expenses even if all current taxes and duties are collected. This is because the Goods and Services Tax (GST) compensation offered by the Centre would end soon.
As a result, the state is seeking additional sources of income. For instance, the police and the Motor Vehicles Department have recently intensified vehicle checking.
Indian states levy VAT or sales tax on petroleum fuel.
During an online meeting with chief ministers to discuss the COVID-19 situation in the country on Wednesday, Prime Minister Narendra Modi named six states, all of them opposition ruled states, that had not decreased sales tax, and asked them to immediately effect a cut in the rates. These States are Tamil Nadu, West Bengal, Telangana, Maharashtra, Kerala and Jharkhand.
CM takes on PM
Meanwhile, Chief Minister of Kerala Pinarayi Vijayan has shot back at Prime Minister Narendra Modi, who had recently asked the state, to cut taxes on fuel. “The Centre increased the tax on fuel 14 times and reduced it four times over the last six years. During this period, Kerala did not raise sales tax on fuel even once. In this backdrop, it is sad that the Prime Minister is criticising Kerala over state tax on fuel. Such a comment should not have come from an administrator who is aware that the state meets a large portion of the expenses on social welfare,” said Pinarayi.
This Finance Minister K N Balagopal, meanwhile, claimed Kerala has not hiked the tax on petrol and diesel in the past six years.
Earnings from fuel
Since financial year 2016-17 – when the LDF government came to power – Kerala has once reduced the price of petrol by Re 1.
The additional income earned by Kerala when fuel prices were hiked by the Centre in each financial year since then has been Rs 700 crore in 2016-17, Rs 255 crore in 2017-18, Rs 283 crore in 2018-19 and Rs 952 crore in 2020-21. There was no extra revenue in the 2019-20 fiscal.
