Will the new fuel cess cost Chouhan in an election year?
Not many would risk this in an election year. Effective midnight January 29, the Shivraj Singh Chouhan government imposed a new 1 per cent cess on petrol and diesel prices, pushing their prices, already among the highest in the country, further up. The Madhya Pradesh Motor Spirit Cess is expected to earn the state an additional Rs 200 crore a year. For comparison, on January 29 when petrol was at Rs 78.73 in Bhopal, it was selling at Rs 71.27 in Delhi. The price differential for diesel was similarly steep: Delhi, Rs 61.88; Bhopal, Rs 67.53. (‘Administered prices’ of petrol and petroleum products have traditionally been high for inland cities compared with port cities unless there is a special city subsidy like in the case of Delhi or the Northeastern states.)
So, what prompted this daring gambit? Well, the fiscal situation is precarious, and taxes on fuels are a very important source of revenue—at Rs 9,000 crore, collections are almost a third of the approximately Rs 30,000 crore of the state’s yearly commercial tax earnings. With borrowings at an all-time high of
Rs 1.75 lakh crore, chief minister Chouhan has virtually no resources to pay for his numerous welfare schemes, particularly for the distressed farm sector.
Some of the cash crunch may also be due to the reduction in VAT advised by petroleum minister Dharmendra Pradhan in October 2017 to bring consumers relief. Several BJPruled states, including MP, had then cut VAT on diesel (5 per cent) and petrol (3 per cent) bringing diesel prices below Rs 60 per litre. But fuel prices have been climbing steadily since then. After the new cess, it is back to the levels they were at when the cut was made in October. This has predictably stoked a storm of protests.
“The chief minister loved riding a bicycle every time the UPA government increased diesel/ petrol prices due to skyrocketing [global] crude prices. He chooses to forget all this now,” says state Congress president Arun Yadav who, incidentally, has also got out his bicycle to protest the new cess.
Spotting a political opportunity, Congress leaders have come out strongly, criticising Chouhan’s move. “Loans taken by the MP government are used in political programmes like the Narmada yatra and Shankaracharya yatra,” says leader of the Opposition Ajay Singh, accusing the government of squandering funds on giving the CM an image boost. Singh sought a white paper detailing how funds borrowed by the state have been spent. State cabinet spokesperson Narottam Mishra says the new cess will be utilised to improve the road infrastructure. But no one’s really buying his explanation.
TAXES ON FUEL FETCH Rs 9,000 cr, A THIRD OF THE STATE’S Rs 30,000 cr ANNUAL EARNINGS
NO BRAKES Congressmen protest the new petrol cess