A Parliamentary panel has asked the Centre to cut taxes on auto and cooking fuel. The revenue contributed by these taxes to the exchequer is three to four times the subsidy given to sell fuel at government-set prices in three of the last four years.
The government?s subsidy on auto fuel was about a fourth of the revenue generated by the petroleum sector in 2006-07. The subsidy, including oil bonds issued to state-run retailers, was a third of the tax collected in 2007-08.
In the next year?2008-09?the subsidy element went up to four-fifth the revenue from the sector due to the historic appreciation of crude oil prices. This, however, came down significantly in the last fiscal. In the April-December period of 2009-10, the subsidy given to the sector remained a fourth of the total tax revenue generated from petroleum products, the Parliamentary standing committee on petroleum and natural gas told the government.
Since a part of the revenue generated from the petroleum sector is being given back as subsidy to control prices, the panel felt that the government should ?moderate or rationalise central taxes to provide relief to the common man,? the panel?s report tabled in the Parliament said.
In 2009-10, bonds worth Rs 71,292 crore were issued to oil retailers, which they could sell in the market to raise funds. The finance ministry subsequently decided to give only cash subsidy, which necessitated an expenditure cut of equal measure under some other head. The idea is to limit the government?s ability to borrow indiscriminately that would threaten its fiscal health in the future.
Last fiscal, the ministry granted only Rs 14,058 crore cash subsidy to oil retailers, way below the Rs 74,002 crore (including bonds) given a year ago. The reduction in the subsidy amount calls for tax reduction, the panel said. Up to February 8, 2010, the average price of Indian basket of crude oil for the last fiscal was $68.61 a barrel.
The committee also asked the Centre to work with state governments to make state-level levies uniform across the country. Currently, these levies vary from 18% (in Orissa) to 33% (in Andhra Pradesh). Some members of the panel also want the government to roll back the 5% customs duty on crude oil and the Re 1 increase in the excise duty on petrol and diesel announced in Budget 2010-11.
