M A I N   N E W S

Punjab, Haryana against cuts
Sales & other taxes on petro products
By Gobind Thukral
Tribune News Service

CHANDIGARH, Sept 26 — Both the Punjab and Haryana Governments are finding it hard to accept the suggestion of the Union Government to cut down sales and other taxes on petroleum products. “This is one major source of revenue and we just can’t afford it,” senior officers here said.

In fact, the officials, who thought this decision had to be taken at the political level, came up with a whole lot of arguments to say that the state governments were already facing an acute fiscal crisis and could ill-afford to lose such a good source of revenue. To some, the very argument of the Union Petroleum Minister, Mr Ram Naik, looked ridiculous. The Union Government would be collecting a whopping Rs 41,000 crore this year through customs and excise duties on crude oil and other products against a target of Rs 27,000 crore. “The Union Minister should take away all money minus Rs 27,000 crore”, one officer said, suggesting this could be a major source to offset the deficit in the oil pool.

The Centre levies 15 per cent customs duty and 32 per cent excise duty on crude oil that reaches the shores of the country. Then on diesel there is 25 per cent customs duty and 16 per cent excise duty. In the case of aviation fuel, 25 per cent is customs duty and 16 per cent excise duty. Even kerosene, the poor man’s fuel and for black marketeers a rich source for adulterating petrol, is not spared. It carries a load of 8 per cent as excise duty. On top of it there is Rs 1,000 per kilolitre road cess on all diesel and petrol. This is rarely shared in proportion to the collections from different states. It is this burden of taxes and levies which raises the price of petroleum products in the domestic market. Subsidy to many looked like a crude joke considering the total tax revenue of Rs 41,000 crore this year (2000-01).

Officials had another argument. The Centre did not bother to consider the burden on the states when it announced the Fifth Pay Commission hikes or when it raised the retirement age from 58 to 60. The states are still reeling under the increment burden of the fifth pay panel in regard to salaries and pensions.

Punjab had collected Rs 265.61 crore till August this year from the taxes on petrol and diesel. Last year, it collected Rs 364.29 crore and during 1998-99 Rs 160.78 crore. Given its precarious fiscal position, it could not spare even a cut of 1 per cent not to speak of 5 per cent. The political bosses will naturally toss the ball back into the court of the Centre.

In Punjab and Haryana there is nearly 20 per cent tax on petrol as agreed among all states under the new agreement. Diesel carries sales tax of 8 per cent. The same is the case with kerosene. LPG has a tax rate of 10 per cent.

Haryana follows the same pattern. its total earning will be Rs 250 crore this year from taxes on petroleum products.

Punjab has in addition 1 per cent cess on all petroleum products. It is called infrastructure cess. Also, the two governments consider this as a sure way of tax collection as the chances of evasion are low. Taxes are collected mostly at source.