Unfair to expect states to reduce fuel tax: Tamil Nadu Finance Minister Palanivel Thiaga Rajan

Chennai: Indicating that Tamil Nadu may not further cut fuel tax, State Finance Minister Palanivel Thiaga Rajan on Sunday said it was unfair to expect States to cut tax.

Arguing that Union Finance Minister Nirmala Sitharaman’s announcement on Saturday to cut excise duty on fuel would cause an additional loss of around ₹800 crores in annual revenue to Tamil Nadu, Rajan said it was neither fair nor reasonable to expect the States to reduce their taxes on fuel since the Union government had never consulted them while increasing the taxes multiple times.

According to him, the tax cuts announced in November 2021 had caused an additional loss of about ₹1,050 crore in annual revenue, he said the recent cut would put a huge strain on the State’s finances.

The DMK Government, which took charge a year ago, “inherited a precarious fiscal position from the AIADMK government and incurred an additional expenditure towards COVID-19 relief activities,” he said. Yet in August last year, it had reduced the price of petrol by ₹3/litre [as part fulfilment of its electoral promise to reduce it by ₹5/litre and diesel price by ₹3 per litre]. “The State government would incur a loss of ₹1,160 crore annually owing to this reduction. Yet this was done, despite the financial strain inherited from the previous government, to reduce the burden on the people,” he said.

In the past seven years, the Union Government’s levies on petrol had gone up substantially, resulting in a manifold increase in its revenues, but the States did not see a matching increase in their revenues. “This is because the Union government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the States,” Rajan added.

According to him, with the recent cuts, the Union Government’s taxes on petrol was ₹19.90 a litre and ₹15.80 a litre for diesel, but was still higher than the 2014 rates by ₹10.42 a litre on petrol (₹9.48 a litre in 2014) and ₹12.23 a litre for diesel (₹3.57 a litre in 2014), he said. In his view, there was a “strong case” for the Centre to further reduce its taxes.

“It is pertinent to point out that the Union government had never consulted the States when it increased the taxes on petrol and diesel multiple times. The exorbitant increase in taxes by the Union government has been only partially reduced through the cuts and the taxes continue to be high, compared with the 2014 rates. Therefore, it is neither fair nor reasonable to expect the States to reduce their taxes,” the Minister contended.

Meanwhile, State BJP president K Annamalai said if the DMK Government did not reduce fuel prices further and offer ₹100 as a subsidy for LPG cylinders, as promised in its poll manifesto, “within 72 hours”, his party would launch a march towards the State Secretariat to press for the same.