Tamil Nadu Minister rules out tax cuts on fuel, says petrol prices were slashed in budget

Ruing out the possibility of further tax cuts on fuel, Tamil Nadu Finance Minister Palanivel Thiaga Rajan said that the state government had reduced tax on petrol by Rs 3 per litre in its budget, passed in August 2021. Turning down the Union government's request to further slash state taxes on diesel and petrol prices, Rajan termed the request as unreasonable and urged the Centre to reduce the levy of tax on fuel prices to rates that were prevailing in 2014.

"While the Union's taxes continue to be exorbitant, it is neither fair nor feasible for the State to further reduce taxes. The sole, simple and fair approach to improve the situation for all is for the Union to reduce the levy of taxes on petrol and diesel to the rates prevailing in 2014. Such a move will automatically reduce states' taxation (as almost all States follow ad-valorem)," he stated in an official press release. 

'Estimated loss incurred by state approximately Rs 1,160 crore annually'

On Friday, the Tamil Nadu minister turned down the Centre's request to further slash petrol and diesel prices subsequent to the recent deduction of taxes by the latter. Additionally, he alleged that the Centre has failed to cater to the requests of states since 2014 and urged the Centre to reverse the surge in taxes. 

The Tamil Nadu government, in a bid to benefit the low and middle-income group using 2.63 crore two-wheelers in the state, is amongst few states in the country to have reduced the tax by Rs 3 per litre on petrol. Notably, the estimated loss incurred to the state government was approximately Rs 1,160 crore annually, the state minister informed. 

Rajan also brought to attention that the Union's decision to reduce Rs 5 per litre on petrol and Rs 10 per litre on diesel would further slash the pump price of petrol by Rs 5.65 and diesel by Rs 11.10 as 'ad valorem' taxes are levied in Tamil Nadu. 

'Several factors compound to final pump price' 

Further, the state finance minister enumerated that while buying a litre of petrol and diesel, there are many factors that compound the final pump price- basic price, Union excise duty, cesses and surcharges on the basic price, transportation costs, state government taxes and dealer's Commission. He also recalled that on August 1, 2014, the basic price of petrol and diesel and the global import prices adhered to the current import prices. 

"The basic price was Rs 48.55 per litre for petrol Rs 47.27 per litre for diesel. On November 4, the basic price of petrol was Rs 48.36 per litre while that of diesel was Rs 49.69 per litre. On August 1, 2014, the Union Government taxes were Rs 9.48 per litre on petrol and Rs 3.57 per litre on diesel. At that time, the State Government taxes were Rs 15.47 per litre on petrol and Rs 10.23 per litre on diesel," Rajan noted. 

"So, when compared to 2014, the Union Government still levies an additional tax of Rs 18.42 per litre for petrol and Rs 18.23 per litre for diesel," he added. 

At present, the petrol price in Chennai stands at Rs 101.40 and the diesel price is Rs 91.43.