FM Nirmala Sitharaman during Budget presentation
FM Nirmala Sitharaman during Budget presentation
ANI Photo

Finance Minister Nirmala Sitharaman on Friday acknowledged that consumers have a case for lower petrol and diesel prices but said a reduction in taxes to make that happen should be a joint call of the central and state governments.

‘‘The government is in a state of dharmasankat [a big dilemma]," said Nirmala Sitharaman at a press conference in New Delhi responding to a question on cutting the prices of petrol and diesel.

The dilemma stems from the fact that as much as 60 per cent of the retail price of petrol, which has shot above Rs 100-mark in some places in Rajasthan, Madhya Pradesh and Maharashtra and is at an all-time high elsewhere in the country, is made up of central and state taxes. Taxes make up for about 56 per cent of the record high diesel rates.

The finance minister said she understood the need of consumers "but in this case, there is a 'condition of direness' in front of the government". She said the only way to find a solution to this problem was for the Centre and the states to hold a dialogue. "So, there is an issue which is layered and as a result that has to be a matter ideally for the Centre and the states to talk about," she added.

Sitharaman had increased central excise duty on petrol and diesel by a record margin last year to mop up gains arising from international oil prices plunging to a two-decade low.

On the issue of bringing petrol and diesel under the Goods and Services Tax (GST) regime, which will end the cascading impact of taxes and bring uniformity, the finance minister said the call has to be taken by the GST Council, the apex decision making body of the indirect tax regime.

Currently, the central government levies a fixed rate of excise duty while states levy different rates of VAT. Under the GST, the two would merge and bring uniformity, solving the problem of fuel rates being higher in states with higher VAT.

"Whenever the GST Council decides to take up this issue, they are well within their interest to take it up and discuss. It's a call which the Council has to take," she said.

Asked if the Centre will take such a proposal to the Council in the next meeting this month, she said.

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Free Press Journal