Patna, Nov. 8: The ruling National Democratic Alliance in the state has been critical of the UPA government for the petrol price increase, but its government in Bihar has been reaping the benefits of successive hikes over the year.
After last week’s price increase, the Bihar government stands to collect in taxes Rs 13.78 from every litre of petrol sold in the state. (See chart)
If only the taxes from refinery to the consumer are taken into account, Bihar’s share is marginally lower than what the Centre earns from each litre of petrol. Such central taxes account for Rs 14.75 of the total retail price per litre.
Bihar levies 24.5 per cent VAT on petrol, whereas in neighbouring Jharkhand, the rate is 20 per cent. Bengal has a VAT rate of 25 per cent plus a surcharge of Re 1.
Since May 14, while the Centre has raised petrol prices four times, the Nitish Kumar government has not given any indication that it would forgo a share of the VAT to ease the burden on the “common man”.
In June, the state government reduced the VAT on cooking gas to one per cent and that on diesel by 0.36 per cent, the twin cuts apparently costing the government Rs 62 crore a year or Rs 5.1 crore a month.
However, the VAT collection from petrol outweighs what the state has given up.
In Bihar, there are 1,726 petrol pumps, whose combined sale per month is 3.4 crore litres of the fuel.
At current prices, this adds up to Rs 242.11 crore, of which over Rs 46 crore will go to the state exchequer every month.
An Indian Oil Corporation official said, on condition of anonymity, that every time there is an increase in the petrol price, it is the state government’s 24.5 per cent VAT which deals the punch as it is in percentage, not rupee, terms. Last year, the state levies accounted for Rs 10.24 per litre and the amount has increased to Rs 13.78 after last week’s hike. Owing to the hikes through the year, the government coffers got richer by about Rs 170 crore solely on account of the sale of petrol in the state in the last 12 months. Last year, the state sales amounted to 3.19 crore litres per month.
Asked whether the state government intends to reduce its tax rate on petrol (24.5 per cent), deputy chief minister Sushil Kumar Modi, who also holds the charge of finance and commercial taxes, told The Telegraph: “We are losing because consumption (of petrol) has reduced. The growth rate of revenue realisation on part of petroleum products has gone down. It’s not possible to reduce the tax structure as the Centre unilaterally announces steep hikes every three months without taking states into confidence. We can’t be guided by neighbouring states as the prevailing tax rate has been in place for the past several years.”
One reason for the reluctance on the part of the Centre and the state could be that petrol is a milch cow that does not have too much of a cascading effect on the ground, unlike diesel and kerosene.
Modi was candid enough to admit this. “Petrol hike affects a section of the society and not everyone like diesel,” he said.
Belying the intensity of the political storm around the hike, petrol accounts for only 1.09 per cent in the inflation index and it is used largely in private cars, two-wheelers and three-wheelers.
“Those who use public transport and cannot afford the luxury of a car will not be hit. However, there is a section of the middle class and above who would be using petrol for bikes and cars. But they are far outnumbered by the grassroots people in cities and villages,” said economist Dipankar Dasgupta.
Two-wheeler sales jumped in October in spite of hikes in petrol prices and interest rates. The latest increase will add approximately Rs 60 to the monthly fuel bill if a bike uses 30 litres a month.
Among car owners, many high-end buyers have been switching to diesel, which is sold on a subsidy. Many foreign carmakers have recently come up with diesel variants to tap the demand. Nigel E. Wark, executive director (marketing, sales and service) of Ford India, said 70 per cent of the national demand for the company’s car was for diesel vehicles.
