Fuel price cut: Sitharaman explains math behind excise duty, compares govt's spending before and after 2014

Follow us on

Petrol-Diesel price cut: Even as petrol and diesel prices were slashed by Rs 8.69 a litre and diesel by Rs 7.05 per litre following the government cutting excise duty on auto fuels to give relief to consumers battered by high fuel prices that has also pushed inflation to record high, the Congress on Sunday said that the step was a political gimmick and not relief to people, as it was like 'three steps forward and two steps back'.

While the Union government cut the excise duty, it also asked states to replicate the same intention by reducing the VAT and giving relief to the common man.

"I wish to exhort all state governments, especially the states where the reduction wasn't done during the last round (November 2021), to also implement a similar cut and give relief to the common man," Nirmala Sitharaman said while announcing a duty cut.

Post the price cut, former Finance Minister P Chidambaram likened the situation of states after the latest excise duty cut on petrol, and diesel between "the devil and the deep sea".

Chidambaram wondered whether the states can afford to give up revenue from VAT on petrol and diesel unless the Centre devolves more funds or gives them more grants.

Amid the blame-game between the Centre and Opposition over the intention of reducing the fuel prices, Finance Minister Nirmala Sitharaman put some facts before the people saying criticism/appraisal can benefit from having them before us.

In a series of tweets, Sitharaman explained the maths behind the excise duty cut in terms of what is sharable with the states and what's not and where the actual cut has been made.

She also compared the total developmental expenditure incurred by the Modi government during 2014-22 to that of UPA's tenure between 2004-14.

1. Basic Excise Duty (BED), Special Additional Excise duty (SAED), Road & Infrastructure Cess (RIC) and Agriculture & Infrastructure Development Cess (AIDC) together constitute Excise Duty on petrol and diesel. Basic ED is sharable with states. SAED, RIC & AIDC are non-sharable.
2. The excise duty reduction of Rs 8/litre on petrol and Rs 6/litre on diesel (effective from today) has entirely been made in Road & Infrastructure Cess (RIC). Even in November ‘21, the reduction of Rs 5/litre in petrol and Rs 10/litre in diesel was entirely made in RIC.
3. Basic ED which is sharable with states has not been touched. Therefore, the entire burden of these two duty cuts (made in Nov, 21 and yesterday) is borne by the Centre.
4. The duty reduction made yesterday has an implication of Rs 1,00,000 crore a year for Centre. The duty reduction made in November’21 has an implication of Rs 1,20,000 crore a year for Centre. Total revenue implication to Centre, on these two duty cuts is thus Rs 2,20,000 crore a year.
5. RBI data shows total developmental expenditure incurred by the @PMOIndia @narendramodi. Government during 2014-‘22 was Rs 90.9 lakh crore.  In contrast, only Rs 49.2 lakh crore was spent on developmental expenditure during 2004-‘14.
6. The expenditure incurred by our government under @PMOIndia @narendramodi includes Rs 24.85 lakh crore spent so far on food, fuel and fertiliser subsidies and Rs 26.3 lakh crore on capital creation.
7. Over the 10 years of UPA, only Rs 13.9 lakh crore was spent on subsidies.

However, Congress spokesperson Gaurav Vallabh said that the BJP government was clueless about the economy and financial management.

The government on Saturday announced a record Rs 8 per litre cut in excise duty on petrol and Rs 6 per litre reduction on diesel.

ALSO READ | Maharashtra govt slashes VAT on petrol and diesel after Kerala and Rajasthan

ALSO READ | Excise Cut: Industry, traders urge states to follow suit and bring more relief to consumers