P.Chidambaram accuses government of ignoring RBI’s request to reduce tax on fuel

The government is ignoring repeated requests from the RBI to reduce tax on fuel, says former Union Finance Minister P Chidambaram. He believes fuel taxes are the most regressive taxes as it impacts the rich and the poor alike.

The Congress leader told a press conference in Goa that due to the current pump price, consumption of other items, including essential items, has gone down – meaning that people are buying less milk, protein, fruits and vegetables as they are spending more on petrol and diesel.

“These are RBI statements. This is the fourth month that the RBI has asked the central government to reduce pump prices by cutting taxes. No central bank can be blunter. But this government is completely deaf,” Chidambaram said. “I don’t think the BJP cares if India is pulled down or not. The BJP only cares if its crony friends are making a huge killing in the stock market. I don’t know who they are helping. They are certainly not helping the people of India.”

The former finance minister highlighted that if the government wants money and revenue, there are other ways to raise it through progressive taxes. “Instead of resorting to progressive taxation, this government is restoring to regressive taxation. We condemn this in the strongest terms.”

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Chidambaram said the poor suffer the most from these exorbitant, unconscionable and condemnable increases in prices. “There is absolutely no economic justification for this rise in prices. This price rise is only because of high taxation. The effective rate of tax on petrol of central government tax alone is 33%. On diesel, it is 32%. On a single commodity to levy a 33% tax and a 32% tax is completely unacceptable. It is more than the corporate tax rate. Corporations that make billions of rupees are taxed at a lower rate. Whereas petrol and diesel are taxed at 33% and 32%.”

India imports 85% of its crude oil requirement and hence an increase in global oil prices naturally pushes the base price component of petroleum fuel. Given that both Central and state level duties have not changed much lately, domestic petroleum product prices are increasing mainly due to the ongoing volatility in global oil markets.