Thiruvananthapuram: Fuel prices in Kerala have reduced in proportion to the slash recently effected by Centre, said Finance Minister KN Balagopal. Prices are at a high point owing to uncontrolled escalation of special excise duty by the centre, the minister added, speaking at press conference in the capital Friday.
In fact, the Central government is not empowered to impose special excise duty. That kind of tax runs against the constitution of India. Imposing central cess amounts to infringement of the country’s federal system, the minster said.
The state government never raised tax on fuel for past six years. In fact, the government reduced the tax rate once in that time. The Oomen Chandy govt, on the other hand, raised tax 13 times during its tenure, said the minister to media.
There existed a system in India by the name “Oil Pool”. Under the scheme, govt shelled out subsidy to hold down fuel prices at fixed levels. And, it was Manmohan Singh who scrapped that system. Presently, although crude oil in global markets is priced low, the prices here are inflated by the Centre by incessantly upping the Special Excise Tax on it, said the minister.
Kerala follows a percentage-based calculation for fuel prices in state. The cost now stands reduced in proportion to the centre’s reduction. The centre charges an outright tax of Rs 32.9 for petrol and Rs 31.8 for for diesel while tax in Kerala is calculated as 30.8 percent on cost of petrol and 22.76 on that of diesel. Thus, fuel price in Kerala rises when centre hikes the price and falls when centre lowers it. Going by that, with regard to the recent slash, prices have come down by Rs 2.30 on diesel and by Rs 1.60 on petrol per litre, the minister said.
There are three reasons primarily for high fuel prices. First, the UPA government divested itself of power to fix fuel prices, leaving it to market play. Even so, prices here barely witnessed a fall when international crude prices fell halfway through. Originally, the Centre wielded the power to fix fuel prices and also had under it a fund by the name “Oil Pool Account”. The norm then was to shell out subsidy from the Oil Pool Fund to keep fuel prices stable. However in 2002, prime minister Manmohan Singh abolished that system.
The second reason for inflated fuel prices is uncontrolled manner in which the centre imposes Special Excise Duty. The Excise Tax that figured at just Rs 8.1 was spiked to Rs 30 per litre by Modi government and the tax that stood at mere rs 2.10 per litre on diesel was raised similarly to Rs 31. That translated to escalation of tax by 15 times r, said the minister.
In 2018 crude cost $80.8 per barrel and the central excise tax stood at Rs 17.98. In 2020, crude fell to just $30 a barrel and instead of passing that huge discount to the public, the centre raised Excise tax all the way up to Rs 32.98! Oomen Chandy government in Kerala too acted in similar fashion, raising taxes 13 times during its tenure. The Opposition demand now for Kerala to lower tax is baseless. State Congress’s goes along an approach that would be helpful to BJP, said the minister.
