No Cut In Fuel Rates: Government Needs Revenue For Public Spending, Says Jaitley

Finance Minister Arun Jaitley provided no indication today (20 September) of any cut in excise duty on petrol and diesel to cushion the spike in rates, saying the government needs revenue to support public spending, without which growth will suffer.

States levy a high amount of sales tax or VAT on fuel, he said without referring to the Rs 11.77 per litre hike in excise duty on petrol and Rs 13.47 a litre on diesel between November 2014 and January 2016, which took away gains arising from plummeting international oil rates.

The Bharatiya Janata Party-ruled Maharashtra levies 46.52 per cent VAT (47.64 per cent in Mumbai) on petrol, the highest in the country. Andhra Pradesh has 38.82 per cent VAT on petrol while BJP-governed Madhya Pradesh levies 38.79 per cent VAT on the fuel.

BJP-led National Democratic Alliance governs 18 of the 29 states.

Jaitley said, however, that the fuel prices will settle down soon.

“You should remember that the government needs revenue to run. How will you build highways?” he said. “The government has increased public spending on infrastructure... Whatever (GDP) growth is there, it is fueled by public spending and FDI. If public spending is slashed, it will mean cutting down expenditure on social sector scheme.”

There is hardly any private investment, he said.

He was responding to questions from reporters at the weekly cabinet meeting on whether the government would consider cutting excise duty.

Petrol price has risen by Rs 7.44 per litre since early July to cost Rs 70.52 a litre in Delhi, the highest in three years. Diesel rates have gone up by Rs 5.35 a litre to Rs 58.79 a litre in Delhi.

As much as Rs 21.48 per litre in petrol price in Delhi is due to excise duty and another Rs 14.99 is due to VAT.

“You have to consider many factors. The hurricane in the US, the refining capacity has been impacted to a large extent. Due to this there is demand supply mis-match, there is a temporary spike,” he said on the reasons for the recent rise in rates.

Jaitley said that of the tax that the central government collects from petroleum product, 42 per cent goes to states.

The government in June junked the 15-year practice of fortnightly revision in rates and moved to daily changes in petrol and diesel in line with international oil movements. (PTI)

Also Read: 10 Reasons Why High Oil Taxes Are Good For India; They Are Also An Antidote To Jihadi Islam