Mumbai: Chief Minister Uddhav Thackeray on Saturday demanded a significant reduction in excise duty. Union finance minister Nirmala Sitharaman earlier in the day announced a reduction in excise duty on petroleum by ₹8 per liter and that on diesel by ₹6 per litre. This will lead to a reduction in the price of petroleum by ₹9.5 per liter and of diesel by ₹7 per litre.
The decision is aimed at giving relief to consumers battered by high fuel prices that have also pushed inflation to a multi-year high. Notably, the tax structure on motor fuels in Maharashtra is among the highest in the country.
In a statement, Thackeray criticized the Center for minimal reduction of excise duty on petrol and diesel. “The central government had two months ago hiked central excise duties on petroleum to ₹18.42 per liter and has now announced that it would be reduced by ₹8. The central excise on diesel was also hiked by ₹18.24 per liter and now a cut of ₹6 has been declared. It is not proper that prices are first raised manifold and then reduced marginally to put up a pretence of rates being cut,” said Thackeray.
Officials indicated that Maharashtra may not follow with an immediate reduction in the state’s share of taxes. “There is no such proposal for a reduction,” said a senior official from the state finance department.
Another source said that while any decision of price reduction would be taken by Thackeray and deputy chief minister and finance minister Ajit Pawar, a reason for reluctance was the obvious impact on the exchequer and the reduced fiscal manoeuvring ability of the states after the introduction of the Goods and Services Tax (GST).
In November, when the union government had reduced taxes on petrol and diesel by ₹5 and ₹10 per litre, the state government had not done likewise.
The state government levies value-added tax (VAT) at 26% plus ₹10.12 per liter on petrol sold in Mumbai, Thane, Navi Mumbai, Amravati and Aurangabad, while it is at a lower 25% plus ₹10.12 in other areas.
Similarly, VAT of 24% plus ₹3 per liter is levied on diesel sold in Mumbai, Thane, Navi Mumbai, Amravati and Aurangabad and it is 21% plus ₹3 in other parts of the state. It charges VAT on an ad valorem basis or the value of motor spirits.
Around 1.15 lakh kilolitre diesel is sold annually in Maharashtra, while petrol sales average around 50,000-kilolitre, resulting in an annual revenue generation of ₹35,000 crores for the state.
Reacting to the Center’s decision to cut excise duty, Nationalist Congress Party (NCP) chief Sharad Pawar said, “The proportion of central excise tax is so huge that it leaves no scope for the state to make any reduction in their tax slab. Now, the cut in excise duty will make sense only if the states won’t have to face any problem.”
Sudhir Mungantiwar, senior Bharatiya Janata Party (BJP) leader and former finance minister, charged that the state government was not reducing its share of taxes on motor spirits as it wanted to defame the Center for high fuel prices.
Uday Lodh of the Federation of All Maharashtra Petrol Dealers Association (FAMPEDA) said that the price difference between the petrol and diesel sold in Maharashtra and neighboring states had led to motorists preferring petrol pumps across the state’s borders. This had led to several pumps in Maharashtra shutting down.
“Maharashtra shares boundaries with seven states. Petrol prices are lower in all of them, except Chhattisgarh. This has led to heavy vehicles and motor transport operators filling diesel there,” he said, adding that the Maharashtra government was dithering in reducing taxes as the union government would get some of the credit.
Lodh further said that petroleum prices in Goa were lower by around ₹14 per liter compared to Maharashtra.