‘Not optimistic about lowering of fuel price’

CHENNAI: Consumers may be feeling the heat of soaring petroleum prices whenever they visit a fuel pump, but for the state government it is a bonanza.The cumulative VAT revenue for August, compared to last year, has gone up by Rs 470 crore. Factoring in GST and the cascading effect of spiralling fuel prices on other products, the final windfall for the state could be more than Rs 500 crore.When the price of petrol was at Rs 67.71 per litre, the VAT revenue for August 2017 stood at Rs 2,255.80 crore. When the price of petrol crossed ?80 per litre, the revenue in August this year stood at Rs 2,725.80 crore. Tamil Nadu charges 32% tax on fuel.Tamil Nadu’s charges VAT only on sale of petroleum products and liquor. With no change in liquor tax or in sales, the increase in VAT revenue has entirely accrued through the hike in fuel prices.On September 11, chief minister Edappadi K Palaniswami said the state would consider lowering VAT on fuel. “We need sufficient funds for carrying out welfare projects. Still, we will explore options for lowering fuel prices,” said the CM.Though other states such as Gujarat and Andhra Pradesh have brought down petrol price by Rs 2 per litre, Tamil Nadu has been silent on bringing down the prices. As the fuel price increase has a cascading effect on other products, the government’s GST revenue will also increase along with the VAT revenue and this might give the state government a double bonanza.REVENUE TO RISEAfter waiting for more than one month and without any relief on fuel price, truck owners have increased the tariff by around 22% and this will definitely increase the prices of several essential commodities and services.“Though fuel prices are increasing, the demand has not declined and to that extent it is good for the state government. Even when the tax rate has not increased, as fuel is being taxed based on its price, the government’s revenue will increase definitely,” said Ernst and Young chief policy advisor D K Srivastava.He also felt the state government is better placed to lower the fuel price.“The state can lower the fuel price by Rs 2 or so per litre and there will be no loss of revenue for the government, since it is not lowering the tax rate and it will definitely lower the burden on consumers,” said Srivastava.Other economic experts are not optimistic about the chief minister lowering the fuel price.“The government will not lower its expenditure and recently several ministers have been on foreign tours and any increase in revenue will be welcomed by the government. We cannot expect any relief,” said an economic professor.