The timing of the rather surprise cut in the Central tax on diesel and petrol by the Modi government is clearly political. The cut came within 24 hours of the by-elections results in 11 states, the results of which were not entirely to the liking of the ruling party. Although it brought some face saving wins in some seats, the unexpected loss in the Lok Sabha seat in Himachal Pradesh has rung alarm bells and already a blame game is on to fix responsibility.
Modi has clearly used the price cuts to exploit the festive spirit on Diwali eve to build some favourable public opinion in favour of his saffron party. To add to the total impact, the NDA-ruled states lost no time in announcing their own cuts in addition to those announced by the Centre.
As of now, 22 states and UTs, including Uttar Pradesh, Madhya Pradesh, Haryana, Himachal Pradesh, Karnataka, Gujarat and Goa, have extended additional VAT benefits on diesel and petrol. Karnataka announced a cut of Rs 8.62 a litre for petrol and Rs 9.40 for diesel, while Madhya Pradesh offered an additional Rs 6.89 price relief on petrol and Rs 6.96 on diesel and Uttar Pradesh lowered VAT on petrol by Rs 6.96 and diesel by Rs 2.04 a litre.
The Modi government has followed up the price cut with an appeal to the states not to bring in politics in the pricing of fuels and proportionately forego a part of their taxes so as to bring relief to the people.The development has put the opposition-ruled states in a dilemma as they do not want to earn the displeasure of the people even as cutting taxes on petroleum products will hit their revenue.
For a start, the CPI-M-ruled Kerala government has flatly refused to effect any corresponding cut in the state-levied taxes, saying that the Centre should have reduced the tax by a bigger margin as in the first place it is a problem created by the Central government itself.
It is as though the Centre has created a problem and left it to the state governments to grapple with it and find a solution. So far, the opposition-ruled states have acted in unison by refusing to announce their own cuts. In fact, except Orissa, no other opposition-ruled state has bitten the bullet. There is apparently a move to bring about a common stand by the opposition states on the issue and some kind of consultations are said to be currently on.
Kerala finance minister K N Balagopal sought to blow the lid off the central game and asserted that the Modi government is misleading the people on the fuel tax issue and singularly blamed the Centre for the high fuel prices. He pointed out that the states were not receiving a share of the revenue collected by the Centre by way of the additional tax.
He further pointed out that the Centre was cheating the states in the name of special tax. In 2018, the price of crude was around 80 dollars and the central tax was Rs 17.98 at that time. But when crude price dropped to one-third, the Modi government raised the tax, he pointed out. The cut of nine rupees has to be seen in the context of the Centre raising the tax by Rs 32, he added.
Irrespective of the merit of the arguments, it is an issue on which the opposition states will have to tread very carefully as it involves perceptions, which need to be managed in terms of its electoral implications.
