Centre may turn up heat on states to cut VAT on fuel, says sources

State governments may find the suggestion difficult to accept because tax revenue from petrol and diesel constitutes bulk of states’ revenue.

Published: 23rd May 2018 02:20 AM  |   Last Updated: 23rd May 2018 05:15 AM   |  A+A-

Petrol pump attendant filling the tank of a Car with petrol after hike in the prices of petrol and diesel  in New Delhi. (File | Express Photo)

Petrol pump attendant filling the tank of a Car with petrol after hike in the prices of petrol and diesel in New Delhi. (File | Express Photo)

Express News Service

NEW DELHI: With petrol and diesel prices continuing their upward journey and Opposition parties stepping up their attack on the government for not doing enough to control the situation, the central government is looking at all possible options to ease the burden on the end consumer.

According to sources, the BJP has taken a political decision to do the needful to reduce fuel prices and also deflect the blame back on the Opposition by asking the states ruled by these parties to cut VAT on fuel.

State governments may find the suggestion difficult to accept because tax revenue from petrol and diesel constitutes bulk of states’ revenue.

With general elections coming up, the Bharatiya Janata Party-led government cannot afford to keep such a sensitive issue unaddressed for long.

Speaking to reporters on Tuesday, BJP chief Amit Shah said, “We are taking increase in fuel prices very seriously. We are working on the situation at the highest level. The government will come up with a solution in three-four days.”

While industry bodies have urged the government to take swift action by cutting the excise duty on fuel, the finance ministry doesn’t support this idea.

“There will be no reduction in excise duty. The ministry has already made its stand clear. Cutting duty will impact revenue targets,” a senior official told TNIE.

The easier option for the government, according to sources, would be to nudge oil firms to absorb the burden arising from spiralling crude prices.Oil minister Dharmendra Pradhan was supposed to meet the heads of oil marketing firms on Tuesday but the meeting was postponed to Wednesday. 

Why Finance Ministry opposes duty cut

According to estimates, every rupee cut in excise duty on petrol and diesel will result in a revenue loss of Rs 13,000 crore for the central government

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