Fuel price hike: Modi asks opposition-ruled states to cut VAT
What's the story
Prime Minister Narendra Modi on Wednesday invoked "national interest" as he urged opposition-ruled states to lower the value-added tax (VAT) on fuel. He believed that by decreasing the tax rate, the country's attitude toward cooperative federalism would improve. Modi made this comment earlier in the day during a meeting with chief ministers from across the country to discuss the worsening COVID-19 problem.
Context
Why does this story matter?
Since the Russia-Ukraine war began on February 24, worldwide crude oil prices have skyrocketed, driving up local petrol and diesel costs. The BJP-led central government has been chastised over increasing petrol prices. The Centre, on the other hand, has claimed that it has been pressuring oil marketing companies to change their rates and urging states to eliminate VAT following its reduction in excise duties.
Statement
What did PM Modi say?
Modi stated that some governments' refusal to obey the Centre's tax reduction directive for fuel resulted in price increases in these states. "I am not criticizing anyone but request Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand, and Tamil Nadu to reduce VAT now and give benefits to people," PM Modi said. "Please reduce VAT for the benefit of your people," he said.
Details
How did states perform after tax cut?
Following the Centre's tax cut, states like Gujarat and Karnataka—both administered by Modi's BJP—reduced their fuel taxes. Meanwhile, Modi said that Gujarat and Karnataka had lost about Rs. 4,000 crore and Rs. 5,000 crore, respectively, due to tax cuts since November. During the same period, Maharashtra collected an excess of Rs. 3,500 crore to Rs. 5,500 crore, he said.
Rates
Fuels price hike in India
Fuel prices in India were hiked by Rs. 10/liter each on petrol and diesel through 14 rounds of revisions since March 22, ending a four-and-a-half-month-long hiatus on price revision. The rates were last hiked on April 6 when both petrol and diesel rates were increased by 80 paise/liter. Currently, petrol in Delhi costs Rs. 105.41/liter, diesel Rs. 96.67/liter, and CNG Rs. 71.61/kg.
Reaction
Opposition fumes; says Centre earned Rs. 26 lakh crore
Meanwhile, Congress spokesperson Pawan Khera said that the central government has earned Rs. 26 lakh crore from central excise duty on fuel. "Why didn't the prime minister mention this?" Khera asked, alleging that the Centre is yet to give the GST share to the states. Similarly, West Bengal CM Mamata Banerjee said that the Centre owes Rs. 90,000 crore of GST to the state.