As BJP states slash oil prices, pressure mounts on Kerala to follow suit

The Kerala, government, however has refused to cut down on the state’s share of oil taxes as the state government hasn’t raised taxes since 2016 and because it would cause a revenue loss of ₹500 crore this year and ₹1,000 crore next year

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The Centre’s decision to slash excise duty on petrol and diesel has mounted pressure on the Kerala government to reduce the oil taxes. While states like Gujarat, Karnataka, Assam, Tripura and Uttar Pradesh have cut down their fuel taxes, the Opposition in Kerala has demanded the government to take similar initiatives in the state.

State Finance Minister KN Balagopal, however has maintained that the state cannot and need not reduce the tax.

He said, the LDF government has not raised the tax on petrol and diesel even once since 2016, but has instead reduced it once unlike the Congress-led UDF government which raised the tax 13 times during its tenure beginning 2014, Balagopal said.

Also read: BJP-ruled states cut VAT on petrol/diesel; Kerala says ‘no’


He said the reduction in taxes effected by the Centre would reflect in state tax too and there is no need for a further reduction. In this way, if the Centre has reduced duties of diesel by ₹10, for a consumer the reduction will translate to ₹12.30 in Kerala. Similarly, while the reduction in excise duties for petrol is ₹5 at the central level, a consumer in Kerala will get a discount of ₹6.56. The additional amounts of ₹2.30 for diesel and ₹1.56 for petrol are deducted from the state tax.

The Congress, however, has demanded the state government to reduce the taxes on the fuel from the state’s share.

KPCC president K Sudhakaran has warned that the Congress will start an agitation against the state government if it do not reduce the oil tax. The CPI(M), on the other hand, has decided to launch a campaign explaining the “double standards” taken by Congress with regard to the state tax on petroleum products. In August 2014, during the tenure of the UDF government, the state tax on petrol was 26.21 per cent. This was increased five times till February 2015 to reach 30.18 per cent. On the contrary, the LDF government has not raised the state tax even for once since 2016, said Balagopal.

In 2018 June, the state tax on petrol was reduced to 30.08 per cent and diesel to 22.76 per cent.  “The state had a revenue loss of ₹509 crore then and has further escalated to ₹1,500 crore,” says Balagopal.

“The Centre kept increasing the excise duty whenever there was a reduction in the price of the crude oil. The excise duty was ₹17.98 per litre in 2018 October when the price of the crude oil was $80.08 per barrel. The excise duty was increased to ₹22.98 per litre in March 2020 when the crude oil price fell to $33.36 per barrel. Both BJP and Congress have been following the same policy of looting people,” Balagopal adds.

The Congress raises the argument that states like Assam, Goa, Karnataka, Manipur and Tripura have announced a reduction in state taxes and Kerala should also follow suit.

The Kerala Finance Minister refutes to buy the claims that all these states effected a hike in the state tax of petroleum products last year to manage the economic crisis caused by COVID-19. All these states have reduced only a portion of the tax that was increased last year, he said.

Also read: After Centre cut petrol & diesel prices, several states too reduce VAT

“Those who demand that the state has to reduce the tax further should see the additional burden put on the government due to the COVID-related crisis. The reduction in the state tax, effected by the Centre’s decision, would cause a revenue loss of ₹500 crore this year and ₹1,000 crore next year. The government is providing ₹5,000 a month to the BPL families which lost members to COVID-19. No other state in India is spending ₹10,000 crore for social security pensions,” the finance minister said.

The state committee of CPI(M) has decided to organise campaigns across the state explaining why the government does not deserve to be blamed.