States must absorb oil shock

Niti chief says states have capacity to reduce tax on petrol and diesel

New Delhi, May 24: States have the capacity and must reduce the duty on petrol, while the Centre should create fiscal space to deal with the impact of spurt in oil prices, NITI Aayog vice chairman Rajiv Kumar said on Thursday.

The rising crude prices in the international market prompted state-owned oil companies to raise domestic prices for 11th day in a row. Petrol costs `77.47 a litre in Delhi and diesel `68.53 a litre.

“There is merit in reducing the duties but both by the states and and the Centre. More so for the states as they tax the oil on ad valorem basis... So states can take that cut much more and better than the Union government,” Mr Kumar said.

He further said that it is important for them (states) to agree 10-15 per cent duty cut and take home the same amount of tax revenue as budgeted.

“Not doing that means being exceptionally greedy at the cost of not just the people but also the economy,” Kumar added.

The states, he said, on an average tax petrol at 27 per cent.

As regards the Centre, the NITI Aayog vice chairman said they have the fiscal space and need to create more to deal with the problem of rising oil prices.

“The Centre has fiscal space and it can create more fiscal space on the non-tax revenue side. Because last year we did very well. We exceeded the Budget target. May be this year also we can do that,” Mr Kumar asserted.

He further said the Centre could consider reducing the additional excise duty on petrol. It should not temper with infrastructure cess which is being directly used for developmental activities, Mr Kumar added.

He also opined that not only petrol but electricity should also be brought under the Goods and Services Tax.