Centre to bear loss due to fuel price cut, no loss to states' revenue: Finance Secy

As the blame game on petrol-diesel prices continues, the Centre clarified that the loss due to the reduction on fuel prices will entirely be borne by the Centre alone. Addressing a press conference on Monday, Finance Secretary TV Somanathan said that the reduction of Rs 5 (in petrol) & Rs 10 (in diesel) has been in the non-sharable portion of excise duty - i.e- not borne by states. He said that the fuel price reduction by the Centre will not result in states revenue loss on account of lower devolution

Centre: 'Loss due to fuel cost reduction borne only by states'

"The reduction of Rs 5 (in petrol) & Rs 10 (in diesel) has been in the non-sharable portion of excise duty, which means entire loss is borne by Central Govt. There is no loss of devolution to any state govt through reduction in excise duty," said Somanathan. Currently, 41 per cent of tax collected is devolved with the states in 14 instalments.

Centre slashes fuel prices

Ahead of Diwali, on November 3, excise duty on petrol and diesel were reduced by Rs 5 and Rs 10 respectively from  November 4. As per govt sources, the reduction in excise duty on diesel being double that of petrol are meant as a boost to the farmers during the upcoming Rabi season. States have also been urged to reduce VAT on petrol & diesel to give relief to consumers.

Later, 22 States and two union territories also reduced the Value added tax (VAT) on Petrol and Diesel to give relief to consumers. However, 14 non-BJP states and 6 UTs did not reduce VAT in Petrol and Diesel. These states are Maharashtra, Delhi, West Bengal, Tamil Nadu, Telangana, Andhra Pradesh, Kerala, Meghalaya, Andaman and Nicobar, Jharkhand, Odisha, Chattisgarh, Punjab, and Rajasthan, read a PIB press release. Incidentally, of the 22 states where VAT has been reduced - six are up for polls next year - Uttar Pradesh, Gujarat, Manipur, Tripura, Uttarakhand, Goa.

After PIB's taunt, Meghalaya and Odisha cut their VAT on fuel by Rs 5.20/lt and Rs 3/lt respectively. With 2022 polls in mind, Congress-ruled Punjab slashed VAT by Rs 10 per litre for petrol and Rs 5 per litre for diesel respectively - making it the steepest cut. Other Opposition-ruled states like Bengal, Andhra, Telangana, Maharashtra which have often slammed the Centre for the astronomical fuel price rise have not cut VAT rates, urging the Centre to release GST compensation to cash-starved states. BJP has slammed the Opposition of politicising the issue and not provide relief to consumers.