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energy | IST

Centre should roll back tax on petrol, diesel to 2014-levels, says Kerala finance minister Thomas Isaac

The central government should roll back tax on petrol and diesel to 2014-levels to bring down the fuel prices to less than Rs 70, said Thomas Isaac, finance minister of Kerala.
"Since the NDA government came to power in 2014, they have increased petrol taxes by Rs 12 and diesel taxes by Rs 14 and now from that, in two installments they have given up Rs 3.5 but what about the rest," asked Isaac.
In an interview to CNBC-TV18, Isaac shared his views on the centre' decision to reduce excise duty on petrol and diesel by Rs 1.50 per litre.
Edited Excerpts:
The Finance Minister announced an excise duty cut on petrol and diesel prices and now at least the BJP led states have followed?
We welcome the action, but it is too late and too little. Since the NDA government came to power in 2014, they have increased petrol taxes by Rs 12 and diesel taxes by Rs 14.
Now from that in two installments they have given up Rs 3.5 but what about the rest? What explanation do they have for having retained this tax increase? Now the crude oil prices are going up they should reduce the tax. Roll it back to 2014 levels and petrol prices will come down to less than Rs 70 and that is what is needed.
I take your point that all governments can contribute, especially because this government three years ago had imposed a bigger fuel cess hike, but their's a definite tax, yours is an ad valorem tax and when crude prices rise and the rupee falls you actually get a windfall. It is only that windfall that you can share with your citizens, can't you?
Now that the prices are going to town we are going to lose that windfall. What I am telling Arun Jaitley and everybody is that we don't want this windfall. Reduce your excise duty, we will never raise our ad valorem duty.
Anyway, before the central government thought of reducing the tax, one month back Kerala had reduced the tax. Now, with the current revenue situation of the state, we are not in a position to reduce the tax. Central government should roll it back and the problem is solved.
So they should do that. They have no justification. At that time they raised the tax saying it is not going to affect the consumer prices because the crude oil prices are coming down. Now when the crude prices are going up they should reduce the tax. But they are not doing it now.
That point is not being debated that this government did increase the fuel cess by Rs 12-14 and has that headroom to cut. But my question to you is that you are not benefiting only because of that Rs 12-14. I just did this simple math when crude was at Rs 70 per barrel the rupee was at 68 per dollar and at that time a barrel of crude in Indian rupee terms was Rs 4,750. Today, crude at Rs 86 and 74 per dollar it is Rs 6,350. So you know there is 30 percent jump only because of the rise in crude and the fall in the rupee. It is that windfall, you have an ad valorem on this number. I agree with you that you don't want to pass on the increase because of your VAT on excise but surely you can pass on what is come to you only because of the fall in the rupee and rise in crude oil price, can't you?
Not in Kerala at this present situation. Our revenue expenditure is increasing because of the flood and rehabilitation programmes and the centre is not contributing to the expected level.
We have already reduced the tax by Re 1 a month back without any promise and without any prompting. Therefore, all that I can promise is let the central government roll back the prices and in ad valorem, we are going to lose the windfall gain and we will never try to neutralise our fall in the revenue by raising the VAT rate.
Put yourself in the shoes of other chief ministers, I know you have a huge problem on your hands and you will need every penny that you can gather but wouldn't other chief ministers have a moral duty to cut their VAT?
What justification does the central government have today about that Rs 10 per litre of petrol and diesel? So they are in the dock? Don't put that blame on us.
Both are to blame, isn't it?
No, I never increased my rates, ad valorem rates is not tweaked everyday looking at the price of the commodity.
But a request to change from ad valorem to specific would finance ministers be agreeable to? That is what the spirit from which the request came?
That is why I am saying when the prices are going to fall because the central government has done away with excise duty, we will never raise the ad valorem rates. We will suffer that whatever loss we make.
What about your comment on the fact that oil companies have also been asked to take a cut? You think we are now back to administered prices?
It simply exposes the hollowness of centre's claim that petroleum companies are free to fix their prices. In fact, the entire blame of what the behaviour of the oil companies today has to borne by the central government.
We had an experience of it at the time of Karnataka elections. For the whole month there was no increase in the prices by the petroleum companies, suddenly the fuel prices began to rise after the elections and now it has been confirmed. It is the centre which calls the shot.