Centre rules out cut in petro taxes

​New Delhi: Undeterred by all India bandh call given by Opposition parties, the Centre on Monday ruled out any cut in taxes on petrol and diesel for now with a top official making it amply clear that neither the central government nor some states had the appetite to stomach revenue loss from such a move.

While a cut in excise duty that the central government levies will impact fiscal deficit, states like Bihar, Kerala, and Punjab are not in a position to cut sales tax (or VAT), the official, who wished not to be identified, said. The government, he said, anticipates that international oil prices, which together with a drop in the value of rupee has been fuelling the fuel price rise to record levels, will moderate in coming days to take pressure off. The comments come on a day when opposition parties held nationwide protests against record high petrol and diesel prices.

Prices in Delhi, where rates are the cheapest among all metros and most state capitals because of lower VAT, saw petrol touch an all-time high of Rs 80.73 per litre Monday while diesel scaled to new high of Rs 72.83 a litre. The official said consumers will have to pay for the fuel they use. While Rajasthan on Sunday announced a 4 per cent cut in VAT on petrol and diesel, Andhra Pradesh Monday said fuel prices will be reduced by Rs 2 each from cut in sales tax.

"A cut in oil taxes will add to the fiscal deficit. National fiscal deficit determines bond yield and with a higher fiscal deficit the rupee becomes shakier," the official said. "Then (as a result of cut in taxes) you have to make budget cuts in developmental expenditure. This is the real consequence of oil tax cut."

A one rupee per litre cut in taxes would result in revenues being hit by Rs 30,000 crore on an annualised basis. Fuel rates have been on fire since mid-August, rising almost every day due to a drop-in rupee value and rise in crude oil rates. Petrol price has risen by Rs 3.65 a litre and diesel by Rs 4.06 per litre - the biggest increase in rates witnessed in any month since the launch of daily price revision in mid-June last year. The official said every state collects VAT and also gets 42 per cent of what Centre collects.