Finance minister Pranab Mukherjee sought state governments’ support in reducing the impact of the steep hike in prices of diesel, kerosene and liquefied petroleum gas (LPG) on the common man even as some top officials claimed that the rise will only have a temporary effect on inflation.
In a letter to state chief ministers on Monday, Mukherjee asked them to reduce levies on diesel, kerosene and LPG in line with the duty cuts undertaken by the Cental government.
An empowered group of ministers (eGoM) headed by Mukherjee on Friday had raised the price of diesel by Rs.3 per litre, LPG by Rs.50 per cylinder, and kerosene by Rs.2 per litre. It also slashed customs and excise duties on petroleum products, which will result in a total revenue loss of about Rs.49,000 crore to the government this year.
On Monday, a few states announced measures to ease the burden on the consumers by cutting levies. The states include Delhi, Kerala, Uttarakhand and Punjab.
The Congress party government in Delhi announced that LPG cylinders in Delhi will cost Rs.40 less for the below poverty line (BPL) families and diesel Rs.0.37 less for all consumers. Diesel will now cost Rs.40.75 a litre in Delhi for all consumers while LPG will be priced at Rs.355.35 a cylinder for families covered under the BPL and Antyodaya schemes.
Delhi became the third state after West Bengal and Haryana to announce reduction in prices of oil products. The Congress party-led government in Kerala also lowered the price of diesel by Rs.0.75 a litre forgoing the additional tax, which would have accrued to the state exchequer after the recent price increase.
The Bharatiya Janata Party (BJP) government in Uttarakhand also announced that it would waive the value-added tax (VAT) on kerosene, and would not charge VAT on the amount recently increased for diesel and LPG. Similarly, the Shiromani Akali Dal-BJP coalition government in Punjab exempted VAT on the hiked amount of diesel and LPG making diesel cheaper by Rs.0.25 a litre and LPG by Rs.2.50 per cylinder.
Planning Commission deputy chairman Montek Singh Ahluwalia said the Centre’s decision to cut duties on other petroleum products will have a negative impact on the fiscal deficit but maintained that the increase in prices will only have a temporary effect on inflation.
In his letter, Mukherjee said the Union government has so far been resisting an imminent increase in the prices despite high prices of crude oil in the international market, which had led to mounting losses of the state-owned oil marketing companies.
“Even though the Central government has been under compulsion to maintain its fiscal and budgetary resource management targets and find additional resources to finance various welfare schemes, it has sacrificed its revenues from the oil sector on account of customs and excise duty in order to minimize the impact on the common man,” the official release said citing the finance minister’s letter.
The Congress party defended the government saying that it was done in the national interest. “When prices rise, it affects common people. We are sensitive towards it. But sometimes hard decisions have to be taken in national interest”, party spokesman Manish Tewari said. However, senior BJP leader Murli Manohar Joshi alleged that the government’s move is intended to contain the fiscal deficit which was “going awry due to high corruption and faulty economic policies”.
Source:-http://www.livemint.com/2011/06/28021539/FM-seeks-support-for-easing-ra.html?atype=tp
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Ankit Wani
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