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'Centre undermining federalism in asking states to cut fuel taxes'

Monday September 17, 2012 07:41:58 PM, IANS

Kolkata: With the centre advising states to lower taxes on petro products, the West Bengal government Monday accused it of attempts to destroy India's federal structure by trying to block the limited avenues of states' incomes.

"I don't know the game plan behind this advertisement, but it is for sure they (union government) are trying to destroy the country's federal structure. The states have very limited avenues of income and by asking the states to slash taxes they are trying to destroy the federal structure," said Subrata Mukherjee, the state's panchayat minister.

"Our party leader Mamata Banerjee will never allow this to happen."

The central government, under attack for hiking diesel prices, Monday issued a strong data-supported defence of its decision, saying oil marketing companies (OMCs) are incurring huge losses due to under-recoveries, which is threatening oil supplies and the nation's economy.

The petroleum ministry said India needed to import 74 percent of its crude oil requirements at international rates, which had risen sharply, and this was compounded by the rupee's steep fall against the US dollar. The ministry put out its stand in a notice, "Was the increase in price of diesel and capping of domestic LPG avoidable?", published in leading English and regional language dailies of the country.

Consequently, state-run oil marketing companies (OMC) had under-recoveries amounting to Rs.1,38,541 crore in 2011-12, which for 2012-13 are projected to rise to Rs.1,87,127 crore, posing a threat to oil supplies and the country's economy.

The government has incurred a net loss of Rs.54,800 crore on account of subsidising fuel supplies.

The ministry said the state governments do not bear the subsidy burden and the record Rs.5 hike in diesel price per litre will yield states an additional revenue of Rs.8,200 crore per annum. Therefore, it argued, the states can forgo this additional revenue to provide relief to the common man by lowering state taxes.

In response to the Left parties' charge that OMCs were showing profits in their balance sheets, the ministry clarified that the profit of Rs.6,177 crore shown on this count is only 0.7 percent of the OMCs' turnover, which too had been realised owing to the subsidy of Rs.1,38,500 crore provided by the government.

Mukherjee added that the central government should lead the way by reducing the taxes.

"They (centre) should lead by example. First, they should slash the central taxes on petrol products and then they should ask the states to cut down on the taxes," he said.

Mukherjee's comments come at a time when his party Trinamool Congress is considering a "hard decision" if the union government does not roll back, within a 72-hour deadline ending Monday, the twin decisions on FDI in retail and diesel price hike.





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