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Bengal dilutes fuel price cut, secretly withdraws tax rebate
January, 30th 2009

You may have been among the lakhs in Kolkata who started their day on a bitter note, arguing with pump attendants about the price of
fuel. Hadnt the Centre slashed the price of petrol by Rs 5? How could you be charged more? Because the state government had secretly informed oil companies on January 14 the sales tax rebate given last year was to be withdrawn as soon as the Centre cut prices. The government just forgot to tell you.

So, petrol was cheaper by only Rs 3.11 a litre instead of Rs 5 and diesel by just 71 paise when it should have been Rs 2. Everyone was furious motorists, cabbies and pump owners. The latter fear that transporters will bypass Bengal altogether and tank up in neighbouring states where fuel is cheaper.

I was shocked when I saw the price of petrol at a pump this morning. I had expected it to be around Rs 42 but I was charged Rs 44. I thought I was being taken for a ride and drove to another pump but the price was the same there, said executive Ranjit Deb. It wasnt just me. Many customers were bewildered and got into heated arguments with fuel station attendants.

Taxi owner Gurcharan Singh was in a foul mood as well. This is sheer cheating. When cab drivers in Delhi are paying Rs 30.86 a litre for diesel, we are being forced to shell out Rs 33.21, he fumed.

Fuel station owners fear a loss in earning from truckers. We will get our tanks filled in Jharkhand, said Raja Roy, general secretary of Calcutta Goods Transport Association. If the Bengal government loses out on revenue, we cant help. It collects cess to develop roads but their condition remains abysmal.

Only oil companies knew what was coming, not the consumers. On January 14, the state government issued a notification stating that the sales tax rebate (of Rs 2.09 on petrol and Rs 1.33 on diesel) would be withdrawn when the Centre slashes fuel prices. This was done as soon as the price revision was announced, explained Debasis Sen, state-level coordinator for state-owned fuel firms.

So, how does the state finance department justify removal of sales tax rebate? When the first round of price cut was announced (on December 6), we did not do anything. But this second slash has brought fuel price to below June-2008 levels. So, we felt it was time to restore sales tax since it is a key revenue source for the state, an official said.

But economists feel the move is ill-timed and not in sync with the Centres effort to boost the economy and encourage consumption through stimulus packages. In fact, none of the states that had cut sales tax or offered rebates following an appeal by the PM last June have removed the concession. The Centre has reduced excise duty on fuel to soften the blow. But the state gove-rnment chose to go against the flow.

This, when fuel prices in Bengal are among the highest in the region due to higher sales tax and a cess since 2003. The state charges sales tax of 25% on petrol and 17% on diesel in addition to the Re 1/litre cess. Its tax component thus works out to Rs 9.40/litre of petrol and Rs 5.59/litre of diesel. Minus this, petrol would retail at Rs 34.65/litre and diesel at Rs 27.62/litre.

If one were to remove the central excise duty of Rs 13.75/litre of petrol and Rs 3.71/litre of diesel, fuel prices would plummet still further to Rs 20.90/litre for petrol and Rs 23.91/litre for diesel. That is unlikely. Not only is fuel a major source of revenue for the Centre and the state, itll also trigger an imbalance in the economy that is now skewed in favour of diesel, said an expert.

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