Reduce additional excise duty, special excise duty of Central pool on fuel, Rajasthan CM Ashok Gehlot urges PM

Rajasthan Chief Minister Ashok Gehlot has once again raised the issue of reducing the additional excise duty and special excise duty of the Central pool on petrol and diesel so that the general public can get proper benefit of reduction in excise duty and VAT simultaneously.

Gehlot in a letter to Prime Minister Narendra Modi has requested that oil companies be directed to stop the continuous increase in prices of petrol and diesel. The daily increase in prices by the oil companies will nullify the benefit of relief given by the Centre and state government to the public.

Gehlot said that it is expected that the Centre additionally reduces excise duty to the tune of Rs. 10 per litre on petrol and Rs. 15 per litre on diesel.

With the Centre reducing the excise duty, the VAT received by the state will automatically get reduced proportionately by Rs 3.40 per litre on petrol and Rs 3.90 per litre on diesel. As a result of this, the state exchequer will have to bear an additional revenue loss of Rs 3500 crore per annum, which the state government was ready to bear in the larger public interest.

The Chief Minister said that from the year 2016, the Central government had decreased the states’ share by continuously reducing the basic excise duty imposed on petrol and diesel. In the meantime, special and additional excise duty is being continuously increased and the states do not get any share of these duties.

He said that the revenue of the Center is getting augmented due to an increase in additional excise duty and agriculture infrastructure cess, whereas the basic excise duty which falls in the divisible pool has gradually been reduced resulting in a reduction in the states’ share of taxes.

Gehlot said that continuous reduction in the share of taxes received by the states is against the principles of Fiscal Federalism.

He said that in a democracy, elected governments have to mobilize necessary fiscal resources for the development work and social security schemes of the state. The geographical location, economic scenario and local conditions of the states also affect the process of providing the benefits of development schemes to the general public.

To collect revenue for the development schemes, the states have been given the constitutional right to levy necessary taxes. He said that the Centre first increased the additional and special excise duty on petrol and diesel and later on reduced it by a minimal level and tried to create an atmosphere of mutual competition among states for reducing VAT which is also contrary to the spirit of Cooperative Federalism.

The Chief Minister said that during the lockdown, on May 6, 2020, the Central government had increased the excise duty by Rs 10 per litre on petrol and Rs 13 per litre on diesel. On November 4, 2021, after reducing excise duty on petrol by Rs 5 per litre and on diesel by Rs 10 per litre, the Centre claimed that it has provided a big relief to the general public, whereas, in reality, in the year 2021 itself, prices were increased by around Rs. 27 and Rs. 25 respectively on petrol and diesel. In such a situation, the reduction in the excise duty by the Central government appears to be insufficient, he said.

Gehlot said that more than 22% of the total revenue of Rajasthan comes from the VAT on petrol and diesel. From January 29, 2021, till now, the Rajasthan Government has reduced around Rs. 3 per litre on petrol and Rs. 3.80 per litre on diesel.

The state is incurring a revenue loss to the tune of Rs 2,800 crore per annum. In the current financial year, till October, there has been a decrease of Rs. 20,000 crore in the revenue of the state due to Covid-19. GST compensation of Rs 5,963 crore has not been released to the state by the Centre. In such circumstances, because of the efficient financial management, our government did not allow the pace of development to slow down, he said.

The state government is ready to fulfil the promises made in our public manifesto and the state budget in a time-bound manner, he added.

He requested the Prime Minister for early payment of the outstanding amount of GST compensation and to extend the period of GST compensation to states till the year 2027 due to continuous increase in prices of petrol and diesel. The daily increase in prices by the oil companies will bring the benefit of relief given by the Centre and state government to zero, he added.

Earlier this year, Gehlot had suggested to the Centre that in view of the weak economic situation of the states due to the corona pandemic and due to economic recession, the period for grant of GST compensation to the states should be increased by five years from June 2022 to June 2027. The state government said that the revenue deficit was caused because of lower than expected GST collections. The state government also demanded that the ratio of the Centre should be increased to 75 per cent in the centrally sponsored schemes.

The state government pointed out that the Union government had promised to compensate the revenue deficit due to the GST collection falling below the expected level due to the coronavirus epidemic and the economic slowdown till June 2022, which should be extended till June 2027.

Local Self Government Department Minister Shanti Dhariwal gave the suggestion in a pre-budget consultation meeting with Union Minister of Finance Nirmala Sitharaman, who discussed the budget for the next financial year with the finance ministers of various states.

Dhariwal said that despite limited financial resources, the Rajasthan government made every effort to combat the pandemic.

He said that in the next financial year (2021-22), the three per cent credit limit would not be sufficient for the state in view of the necessary financial resources.

Dhariwal said in the virtual meeting that 32 per cent of the states' share in Central taxes was increased to 42 per cent but the grants and planning assistance received by the states have all been included in this 42 per cent category.

Also, the share of the Central government which was 75 per cent in centrally sponsored schemes was reduced to 50 per cent. This is putting an additional financial burden on the states and hence it should be increased to 75 per cent again, he said.

Dhariwal demanded an increase in royalty rates of minerals, which has not been increased for more than four years. He also suggested a reduction in import duty from 7.50 per cent to 2.50 per cent on gold and silver jewellery besides precious and semi-precious jewellery made in the country.

Dhariwal also demanded that looking at the drinking water needs of the state, the eastern canal project should be made a national project to enable it to get budgetary provisions and support.

He demanded that all the railway projects of the state that were approved in the past should be given priority.

He said the Rajasthan government has passed three bills in the interest of farmers. On the same lines, three agricultural laws made by the Central government should be revisited so that dissatisfaction spread among the farmers can be out to rest.