September 23, 2012

Bengal’s hidden gain from diesel adds to your pain

Udit Prasanna Mukherji, TNN | Sep 18, 2012, 07.34AM IST

KOLKATA: Don't be surprised if diesel gets dearer again in October without any hike being announced by the Centre and all other parameters — international price of crude oil, rupee-dollar exchange rate or tax rates — remaining unchanged. Bengal and some other states are enjoying an extra benefit in the form of a 20% surcharge on sales tax that adds up to the Rs 50.61 price tag of diesel here.

Bengal earns Rs 1.62 per litre of diesel as this irrecoverable surcharge, say finance departmentsources. This component alone fetches the state government a monthly revenue of Rs 45 crore.

It's called an "irrecoverable" surcharge because the state does not pass it on to oil companies. All these years, the Centre used to pay this amount to oil companies because they couldn't recover it from the states. On July 26, 2012, the Centre refused to carry the burden any longer and allowed oil firms to recover a portion of it by increasing prices. The recovery was capped at Rs 1.08 a litre for diesel. Now that diesel prices have been increased by Rs 5, this component adds up to Rs 1.62 a litre in Bengal but because of the cap, oil companies can recover only Rs 1.08. The remaining 54 paise goes to the Bengal government's coffers. However, this 54 paise may well be passed on to you as the Centre proposes to review the under-recovery every quarter.

Diesel price: 50.61/lt (inclusive of central, state taxes) Diesel sold in state/month 2.8 lakh kilo litre.

State earns
Rs 264.6 cr per month Sales tax at 17% is 6.83/litre Cess is 1/litre Irrecoverable Surcharge at 20% of sales tax is 1.62/litre Total: 9.45/litre.

Why price may rise again in October
Irrecoverable surcharge/lt charged by state is 1.62 Earnings from irrecoverable surcharge per month is 45 cr Surcharge not passed on to oil cos. Till July 2012, Centre compensated the oil companies From Aug 2012, Centre says it won't share the burden, asks oil firms to recover a portion of this component by increasing prices The cap for recovery fi xed at 1.08/lt for diesel 5/lt hike in diesel price takes surcharge to 1.62/lt, but oil cos can recover only 1.08 Remaining 54p may be passed on to consumers from Oct as Centre proposes to review under-recovery every quarter .

Ministers fume at tax-cut advice
This irrecoverable surcharge component explains why fuel prices in Bengal are higher than some other states. Taking the Rs 5 hike into account , the Mamata government earns an additional Rs 285.60 crore a year as sales tax, cess and irrecoverable surcharge taken together . TheManmohan Singh government is urging state governments to give up a part of this gain to lessen the burden on the consumer. An advertisement issued by the ministry of petroleum and natural gas on Monday says: "The recent increase in diesel price will yield an additional tax revenue of Rs 8,200 crore per annum to the states. The states can, at least, forego this additional revenue to provide additional comfort to the common man."

The suggestion has drawn flak from Mamata Banerjee's cabinet colleagues . "The state government has meagre resource avenues, unlike the Centre. Now if the Centre starts dictating ways to the state government then there is no point calling this a democratic set-up ," said panchayat minister Subrata Mukherjee. Transport minister Madan Mitra reacted more aggressively: "Who are they (Centre) to suggest what state governments should do? They should have issued a notification instead of giving a suggestion through advertisement . Our government swears by ma mati manush, and our leader and chief minister will take the call on this."

Though the Opposition in Bengal is at loggerheads with the Manmohan Singh government as well, Left Front chairman Biman Bose came out with a similar suggestion for the Mamata Banerjee administration . Bose pointed out that the Left Front government had slashed sales tax on diesel price in 2008-09 to give relief to the common man and urged Mamata to do the same "if she was sincere to the cause of the masses" . 

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