Oil Minister Dharmendra Pradhan has urged states to slash VAT on fuel.
In an exclusive chat with CNBC-TV18's Yash Jain, he also said that petroleum products must be brought under the ambit of the goods and services tax.
The Union government earlier in the month reduced the basic excise duty on petrol and diesel by Rs 2 per litre.
He said in a Federal structure one can only advice and request. How states manage their own fiscal, and tax their citizens is upto them. However, as per our assessment, we have suggested that every state should reduce 5 percent depending on the tax structure, so there could be a reduction of Rs 3-5 in prices if the states reduce VAT by 5 percent. The government of India has fulfilled its responsibility by slashing 2 percent -- on both diesel and petrol, he said.
Below is the verbatim transcript of the interview.
Q: Let me start by discussing with you a topic which has taken a lot of attention in the recent past and that is the fuel prices. The centre has recently slashed the excise component on petrol and diesel and also urged the states to reduce the VAT component as much as up to 5 percent. Barring five states, none of the other states have really followed it up. What sense do you make out of this and how confident are you that other states will also follow the VAT cut soon?
A: How state will manage their own fiscal model, how they will be taxing their own citizens it up to state. In a federal structure we can only request. We cannot thrust upon a unified policy what you should do.
According to our assessment, we have suggested every state should reduce whatever the tax structure might be in their state, they should reduce by 5 percent. In that way, around Rs 2-3 reduction can be there in the respective price through the reduction of the state VAT.
Government of India took responsibility by slashing Rs 2 on each commodity, petrol and diesel, we have done our responsibility, we have fulfilled our responsibility. I appreciate some of the states have cooperated in that spirit, gradually. I am talking to different states to individual ministers, to individual finance ministers of the respective states.
I think gradually people will cooperate. But primarily, we cannot force, it is up to states. Citizen of the respective states are knowing everything due to high tax regime, why should they be punished, is up to them.
Q: In the recent past also we have seen there has been an uptick as far as international crude prices are concerned. If this continues, help me understand what is your outlook there? Do you expect this uptrend in the international crude prices to continue and if this happens then would the centre be in a position to revisit the excise structure and would the centre have the leeway to give further cuts on the excise structure if the prices again rise?
A: These things are very dynamic. Recently we have reduced and slashed Rs 2 and you media friends have a temptation to ask same question repeatedly. I do not think we should give any knee-jerk reaction on such things. To create a stable market, we have to accept the dynamics of international price.
Q: One question on the inclusion of petrol and diesel under GST. It is of course, the most used commodity. You have support from the various states as far as including GST, including petrol and diesel under GST is concerned. In that situation, why has the proposal still not been taken up by the GST Council and as the Minister of the concerned commodities, would you ask the GST Council to take it up on priority?
A: I have requested GST Council time and again this commodity must come within the purview of GST Council. But as I said in the press conference, it has to be consensus decision, we cannot thrust.
Q: On the point of PSU consolidation, of course, HPCL and ONGC merger is currently underway, how soon do you expect this merger to conclude and there is still no clarity as far as how the funding would work. Would the option of a combination of a market borrowing and selling the stake which ONGC has in a few PSU companies we considered or is there a different approach which is being taken up and how far have we gone with this?
A: I do not see any confusion on the balance sheet part, the financial part of ONGC. ONGC balance sheet is very robust and whether it is equity funding or whether it is financing to ONGC, any agency it is not an issue.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
