Amid an outcry over
record high petrol and diesel prices, Union Finance Minister Nirmala Sitharaman
on Saturday said the Centre and state governments will have to together work
out a mechanism to bring retail rates to reasonable levels.
Photograph: Courtesy, Nirmala Sitharaman on Twitter.
As much as 60 per cent of
the retail price of petrol, which shot above Rs 100-mark in some places in
Rajasthan and Madhya Pradesh and is at an all-time high elsewhere in the
country, is made up of central and state taxes.
Taxes make up for about 56 per cent of the record high
diesel rates.
Sitharaman,
who had increased central excise duty on petrol and diesel by a record margin
last year to mop up gains arising from international oil prices plunging to a
two-decade low, remained non-committal on cutting taxes to give relief to
consumers.
"This
is a very vexatious issue. An issue in which no answer except reducing the
price (of fuel)
will convince anyone. I know I am treading on an area and whatever I may say,
to bring in the reality into picture, will only sound like I am
obfuscating."
"I
am avoiding my answer. I am shifting the blame," she said, addressing a
gathering at an event organised by the Chennai Citizens' Forum in Chennai.
She went on to explain the
tax structure and how production cuts by oil cartel OPEC and its allies had led
to a rally in the international oil prices, leading to a hike in retail rates
in India.
She, however, said the
answer may lie in bringing petrol and diesel under the Goods and Services Tax
(GST) regime, which will end the cascading impact of taxes, and bring
uniformity.
Currently, the central
government levies a fixed rate of excise duty while states levy different rates
of VAT. Under GST, the two would merge and bring uniformity, solving the
problem of fuel rates being higher in states with higher VAT.
"What I am saying is
that this is a vexatious issue and no minister can ever convince anybody
because Indians being Indians and I am one of them (will not be convinced),"
she said.
"It is a matter of
fact that both Centre and states will have to talk."
Stating that the states
levy ad valorem rates of sales tax or VAT which help them get more revenue
whenever prices go up, she said it won't serve any purpose if the Centre were
to take the moral high ground and bring down excise duty to zero.
"I can do that (cut
taxes) if I have a certain guarantee that my revenue foregone will not be
an opportunity for somebody else to get into this space and gain that," she
said.
"If all of us are
talking about consumer prices (on fuel to) come down (and the)
tax raised by the Centre, tax raised by the states are not holier than one
another."
The taxes by the Centre and
states are equal, she said.
Fuel retailers, who were given
pricing freedom over the years, daily decide on retail rates depending on
benchmark international prices and foreign exchange rates.
"Technically, the oil
prices have been freed and the government has no control over it," she
said, hoping that international oil prices will come down.
India is 85 per cent
dependent on imports to meet its oil needs and so retail rates are linked to
international prices.
"So the long and short
of it is the states and the Centre have to sit together and see whether there is
a way in which the retail price of fuel is at a reasonable level," she
said.
Sitharaman said as a
finance minister she cannot be one minister in the Union government to say how
much the price can be decreased and whether that would not guarantee the states
to earn more money.
"Because every
government needs more money, needs revenue and at the same time I can see a
relief that not one additional paisa is being demanded from the taxpayers (from
the budget)," she said.
Asked whether bringing the
fuel prices under Goods and Service Tax would lead to an answer, she said,
"It can be."
"But to get it (fuel
prices) under GST needs to be a thorough discussion in the GST Council (comprising
Centre and the states)," she said.
The finance minister said
if the GST Council agrees on one rate then all over the country there can be
one fuel price rather than Chennai being more expensive than New Delhi or New
Delhi more expensive than Mumbai.
"That anomaly can be
addressed if it is under GST. And that can be just one tax which can be shared
by both the Centre and state," she said.
Petrol and diesel prices
have been increased for 12 straight days, taking them to an all-time high of Rs
97 per litre for petrol in Mumbai and over Rs 88 for diesel.
Retail pump prices differ
from state-to-state depending on the local taxes (VAT) and freight.