Can reduce taxes on fuel, if Centre compensates: Maharashtra government

The Maharashtra government has ruled out reduction in state taxes to bring down spiralling petrol and diesel prices. The state government has written to the Centre for compensation if the latter wants the former to forgo state taxes.

State finance minister Sudhir Mungantiwar on Tuesday said the state has written to the Center for the compensation. “To reduce the spiraling petrol and diesel prices, we brought down the surcharge of Rs2 on petrol and Rs1 on diesel in October last year. It resulted in the annual loss of Rs3,067 crore. We will not be in a position to bear any more losses as other revenue sources have shrunk. We have written to the Centre to compensate the losses, if it wants the petrol and diesel prices to be reduced,” he said.

The state government has reduced the surcharge on petrol and diesel last year after the Central government issued directives, amid the uproar. A few other BJP-led states had followed the Centre diktat.

The finance minister said it is true that the petrol and diesel rates in the state are highest in the country. “Our State Goods and Sales Tax contribution in the country is the highest at 16%. The second highest contributor is Uttar Pradesh at 9%, which is behind us. If we are contributing at this scale, the Centre should consider to compensate us with the losses borne by us. Until the Centre compensate us, it will not be possible for us to think of reduction,” he said.

The prices of petrol and diesel in Mumbai and Maharashtra are highest in the country. 38% to 48% of the petrol prices are attributed to the state and central taxes. The VAT and surcharge levied by the state on petrol and diesel are one of the highest in the country. In Maharashtra, the VAT is 24% and surcharge of Re 1 in urban areas including Mumbai, Thane, Navi Mumbai and 21% and Re1 in rural areas on diesel. The VAT and surcharge on petrol is 26% and Rs9 in urban areas and 25% and Rs9 in rural areas.

Reduction of the surcharge on petrol by Re 1 amounts to the annual loss of Rs450 crore to the exchequer. The reduction of surcharge by Re1 on diesel amounts to the annual loss of Rs900 crore.