How Bengal govt gains from hikes

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How Bengal govt gains from hikes

SRIKUMAR BONDYOPADHYAY AND SAMBIT SAHA

Calcutta, Nov. 4: Trinamul MPs want to pull out of the UPA government over the petrol price increase but their own party’s government has been reaping the benefits of successive hikes since May. After yesterday’s price increase, the Bengal government stands to collect in taxes Rs 15.13, including a Re 1 cess, from every litre of petrol sold in the state. (See chart in lead story) If only the taxes from refinery to the consumer are taken into account, Bengal’s share is actually higher than what the Centre earns from each litre of petrol. Such central taxes account for Rs 14.78 of the total retail price per litre. Since May 14, while the Centre has raised petrol prices four times, the Mamata Banerjee government has not given any indication that it would forgo a share of the sales tax to ease the burden on “the common man”. Mamata withdrew the surcharge on cooking gas, which apparently cost the government Rs 75 crore a year or Rs 6.25 crore a month. However, the sales tax collection from petrol outweighs what the state has given up. “In Bengal, there are 2,500 petrol pumps, each selling on an average 8,000 litres of the fuel a month,” said Surojit Kole, the general secretary of the West Bengal Petroleum Dealers’ Association. It means that on an average, 2 crore litres of petrol are sold every month in the state. At current prices, this adds up to Rs 146.30 crore, of which over Rs 30 crore will go to the state exchequer every month. Asked why the Bengal government was not reducing the sales tax on petrol — the Congress-led front in Kerala did so today — a senior minister said: “We are devoting the next seven days to making the Centre see reason and convincing it to roll back the price. We hope to succeed in this. If this does happen, it will happen only because of our leader Mamata Banerjee. We will consider the sales tax reduction after the final decision is taken on the hike and correspondingly our continuation in the UPA government.” The Centre has not indicated so far whether it will cut its share of the tax. 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. 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, used by all economic sections, have jumped in October despite hikes in petrol prices and interest rates. The latest hike will add 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.