Putting the ball back to the Centre's court on the issue of tax cut on petro products, states on Monday asked the Centre to share 50 per cent of Rs 8,000 crore revenue loss caused by tax and duty reduction on fuels. "Several of the states, confronted with this unusual situation (of the Centre's move to raise prices of petro products), have taken the decision to reduce sales tax on petrol and diesel and cut VAT rate on LPG or to provide subsidy," VAT panel Chairman Asim Dasgupta told reporters.
"We want 50 per cent of this loss incurred by states to be shared by Government of India," he said after a meeting of the Empowered Committee of state finance ministers on value added tax (VAT) here. He said a wrong message is going to the people as if the states are prepared to take this loss always. "States cannot take this beating further. They have limited revenue raising power and huge developmental responsibilities," he said.
Dasgupta said states would lose at least Rs 8,000 crore due to cut in sales tax on petrol, diesel and on VAT on LPG as well as reduction in devolution to them caused by the Centre's move to cut customs and excise duties on petrol and diesel. To bail out oil marketing companies, which are suffering losses due to surging global crude oil prices, the Centre had on June 5 announced a hike in prices of petrol, diesel and LPG by Rs 5 a litre, Rs 3 a litre and Rs 50 a cylinder, respectively. The Centre also cut excise and customs duty on crude and other petro products, taking a hit of over Rs 22,000 crore. Prime Minister Manmohan Singh had also asked states to cut their taxes on petro products, which many of them did. According to Dasgupta, 10 of the total 33 states and Union Territories have cut sales tax on petrol, while 15 reduced sales tax on diesel. Some states like Delhi has cut only VAT on LPG.
Dollar pushes oil to near $140 a barrel
The price of struck a record high of USD 139.89 a barrel on Monday even as Saudi Arabia is said to be preparing to increase output.
New York main oil futures contract, light sweet crude for July delivery, beat its all-time high of 139.12 dollars recorded on June 6.
The dollar fell on a weak report on New York state manufacturing activity, analysts said. Many buy commodities such as oil as a hedge against inflation when the dollar falls. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies.
Many analysts believe the dollar's protracted decline is a major factor behind oil's doubling in price over the past year.
Saudi Arabia has called an unprecedented one-day meeting of oil-producing and consuming nations in Jeddah on June 22, which could be attended by some heads of state. Britain's Prime Minister Gordon Brown has said he will be there.