Tamil Nadu, Kerala against reducing levies

Finance minister Nirmala Sitharaman’s comments, that the Centre is bearing the entire burden of the fuel duty reduction, came following the opposition’s “criticism” or “appraisal” of the decision announced on Saturday aimed at blunting some of the impact of the Russia-Ukraine conflict on Indian households grappling with higher food and fuel prices. The Centre cut tax by Rs 8 on a litre of petrol and Rs 6 on diesel.

On November 4, excise duty was cut by Rs 5 on petrol and Rs 10 on diesel. “The duty reduction made yesterday (Saturday) has an implication of Rs 1 lakh cr a year for the Centre. The duty reduction made in November ’21 has an implication of Rs 1. 2 lakh crore a year for (the) Centre. Total revenue implication to Centre on these two duty cuts is thus Rs 2,20,000 crore a year,” the FM tweeted.

She also reiterated how the Narendra Modi government had significantly stepped up development expenditure, including the subsidy payout for food, fuel and fertiliser. The Centre has argued that the steps announced by Sitharaman on Saturday were meant to provide relief to citizens from the burden of high global prices and had also nudged opposition-governed states such as Maharashtra and Tamil Nadu to pare state taxes.

Soon after the Centre’s announcement, former FM P Chidambaram had suggested states had little headroom to reduce VAT, something that most BJP-governed states had done in November following the first round of excise duty cut. On Sunday, however, the senior Congressman said he got it wrong as clarified by the FM, states’ share of central taxes will not be affected.

Tamil Nadu FM P Thiaga Rajan made it clear that the DMK-governed state was not reducing levies. “The Union government didn’t inform, let alone ask for any state’s view when they increased Union taxes on Petrol ~23 Rs/ltr (+250%) & Diesel ~29 Rs/ltr (+900%) from 2014 Now, after rolling back ~50% of their increases, they’re exhorting states to cut. Is this Federalism (sic)?” he tweeted.

Kerala is in no mood to make any additional reduction in fuel price as it considers cascading revenue loss it suffers on account of excise duty cut by the Centre as the contribution of the state. “We welcome the Union government’s decision to cut down the petrol-diesel price. As part of the excise duty cut, the state government would reduce the excise tax on petrol and diesel by Rs 2. 41 and Rs 1. 36 respectively,” the office of FM K N Balagopal informed.