Kerala has no plans to provide fuel price relief, FM cites fiscal crunch as reason

Petrol price

Finance minister K N Balagopal has ruled out any sales tax relief for consumers reeling under frequent increases in the prices of petrol and diesel. After a lull of two months, fuel prices have begun to escalate on a daily basis.

He was also non-committal about providing fuel tax subsidy for fishing boats, taxis and autorickshaws. "At the moment we have not taken a decision on this, " the minister said in the Assembly on Tuesday.

Fiscal crunch looks to be the reason for his reluctance. "It would not be right to reduce the taxes levied by the state to tackle the price rise triggered by the excise duty and cess by the Centre, " Balagopal said. "If we do this, it would become hard for us to sustain the various welfare schemes, including welfare pensions," he said.

Balagopal hinted that the government was not willing to go further than the relief announced in 2018 by the last LDF government. In 2018, the government had reduced the sales tax on petrol to 30.08% from the 31.80% that had prevailed under the Oommen Chandy dispensation. The sales tax on diesel was brought down to 22.76% from 24.52% under the UDF government.

Balagopal has not even accepted the proposal of his own department. A report drawn up by the Finance Department, ''COVID-19 Pandemic Response Strategic Report', had recommended a new method to calculate the sales tax on fuel.

As it stands, sales tax is a fixed percentage, which means that whenever the Centre increases the price of fuel the state government would automatically gain. The sales tax imposed by the state is on the amount that includes all Central impositions, including excise duty and cesses.

The Finance Department's report said that half of the sales tax can be retained as a percentage but the other portion should be a fixed amount, an absolute number. If so, this part of the sales tax would at least remain unchanged even when the Centre ups the fuel prices.

The minister said the the LDF had not raised the sales tax on fuel since 2016. But, during the same period, the minister said the Centre had increased the excise duty on petrol and diesel umpteen times.

Balagopal was also not impressed by the UDF claim that under Oommen Chandy sales tax was reduced. He said it was true that sales tax on petrol was reduced four times under Chandy but remains unsaid was that he had increased it 13 times. The sales tax on diesel was also reduced twice by Chandy but was upped six times. As a consequence, Balagopal said the sales tax on petrol and diesel that were 29.01% and 24.69% in 2011 became 31.8% and 24.52% by the time they lost power in 2016.

Balagopal said the only way to reduce fuel prices was for the Centre to reduce its excise duties.

When the BJP came to power, the total duties and other levies imposed by the Centre on petrol and diesel were Rs 9.476 and Rs 3.564 per litre respectively. Now, after the frequent hikes, they are Rs 32.90 per litre (petrol) and Rs 31.80 per litre (diesel). 

Therefore, in seven years, the central levies on petrol increased by 247% and diesel by a whopping 792%.

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