PM Asks States to Reduce VAT on Fuel and to Fight against Covid without Affecting the Economy

Manas Dasgupta

NEW DELHI, April 27: The prime minister Narendra Modi on Wednesday asked the state governments to reduce the Value Added Tax (VAT) on petrol and diesel to bring down the fuel prices in the country and to take effective steps to control Covid situation without affecting the economic activities.

Addressing a high-level meeting with the chief ministers of various states, Modi was particularly harsh on the non-BJP states most of which refused to cut VAT when centre had reduced the taxes on petrol and diesel in November, last year, and pointed out that most of the BJP-ruled states and its allies agreed to reduce the tax and passed on the benefit to the consumers even at the cost of their own revenue collection.

Requesting the opposition-ruled states to reduce the VAT on fuel “in the spirit of cooperative federalism,” he said the country strongly fought a long battle against Covid through that spirit and must also do the same for economic issues given the impact of global issues like the ongoing “war-like situation.”

“Let me give you a small example. The Centre reduced the excise duty on petrol and diesel last November to reduce the burden on the citizens. We also requested the states to reduce their taxes and transfer the benefit to the people. Some states reduced taxes but some states did not give any benefit from this to the people. Due to this, the prices of petrol and diesel in these states continue to remain high. In a way, this is not only an injustice to the people of these states but it also has an impact on neighbouring states,” Modi said.

Stating that the states who refused to reduce VAT was doing “injustice” to the people of their respective states, Modi said, “I am not criticising anyone, just discussing,” the prime minister said while listing out the states that did not reduce VAT on fuel during the steep hikes. “For some reason, states like Maharashtra, West Bengal, Telangana, Andhra Pradesh, Tamil Nadu, Kerala, and Jharkhand did not agree to slash VAT on fuel. The burden of high prices continued to stay on the citizen,” he said.

The PM said it’s natural that those states that reduce their taxes will suffer losses in revenue but several states took that “positive step” anyway. Had Karnataka not cut taxes, it would have collected an additional over ₹ 5,000 crore in revenues during the last six months. Gujarat would also have collected ₹ 3,500-4,000 core more,” he said and added that states that did not reduce VAT earned additional revenues in thousands of crores.

He directly appealed to the Chief Ministers to reduce state fuel tax and pass on the benefit to the citizens. He also pointed out that 42 per cent of the Centre’s revenues go to the states. “I request all states that in a time of global crises, we should follow the spirit of cooperative federalism and work together as a team,” he said.

The Central government in November had reduced excise duty on petrol and diesel by ₹ 5 and ₹ 10 respectively. Following the Centre’s decision, 25 states and Union Territories, mostly ruled by BJP or their allies had reduced VAT on petrol and diesel to give relief to consumers.

“The situation of war which has arisen, has affected the supply chain, and in such an environment, the challenges are increasing day by day,” Modi said in an apparent reference to the Russia – Ukraine war. “This global crisis is bringing many challenges. In such a situation, it has become imperative to further enhance the spirit of cooperative federalism and coordination between the Centre and states,” he said.  “I request that what should have been done in November, you should pass on the benefit to the citizens by reducing VAT,” Modi said.

During the interaction, Modi also emphasised that priority in the new phase of pandemic should be to vaccinate all the eligible children population — directing the states to run special vaccination campaigns needs to be implemented, especially in the backdrop of children returning to the schools after a long break.

“After a long break, the schools have reopened in our country. Some parents are worried about the increase in cases in some places. There are reports from some schools reporting children being tested positive for Covid. However, it is a matter of satisfaction that many children have also received protection through the vaccines. Yesterday, the regulator gave permission to administer Covaxin for 6-12 years. It is our priority to vaccinate all the eligible child population. For this, we have to run special drives in the schools. We have to create awareness among the parents and the teachers about the importance of vaccination,” Modi said.

Modi highlighted that the twin strategy of bringing the cases under control and also allowing the economy to continue should remain the priority. “During the third wave, we have witnessed more than three lakh daily cases. Every state handled these cases well. They also allowed economic and social activity to continue. This balance should be part of future strategy. Our scientists and experts are continuously monitoring the global situation. Based on their advice, we have to adopt a pre-emptive, proactive, and collective approach,” Modi said.

The prime minister specifically told the states that for early tracking of the variants the local administration should conduct 100% RT PCR testing of all hospitalised patients with influenza like illness and severe acute respiratory illness. “It was our priority to stop the infections right at the beginning. We have to continue to make this our priority now. We have to effectively implement the test, track and treat strategy. It is very important that we do 100% RT PCR testing on hospitalised patients with influenza-like illness and severe acute respiratory illness; all the positive cases should be sent for genome sequencing. By doing this, we will be able to detect the new variants,” Modi said.

On medical infrastructure, Modi asked the states to ensure all the PSA oxygen plants, including the hospital beds are made fully functional. “We have spoken about the up-gradation of health infrastructure. We have to ensure the up-gradation is completed swiftly. We are in a better position with respect to the availability of beds, ventilators, and the PSA oxygen plants. However, we have to ensure that all of these facilities are fully functional. They have to be monitored and responsibility has to be fixed. If there are any gaps, it my request, that it should be verified at the top level. We also have to scale up our infrastructure and manpower in the medical colleges and district hospitals,” Modi said.

Modi advised the states to promote Covid-19 appropriate behaviour at the social gatherings. “At the same time, we should ensure we don’t create panic among the public,” he said. He also reiterated the vaccination will remain the most potent shield against severe Covid-19. “There are many things that we have learned from our experience of the last surge that we witnessed a few months back. All of us successfully fought the Omicron surge without creating any panic. In the third wave, we did not hear from any state about situation going out the control,” Modi said.

Modi also issued a stark warning on rising temperatures and the number of fires in landfills, garbage dumps and forests, saying ‘temperatures are rising rapidly in the country… we are seeing increasing incidents of fires in various places’. Modi asked the states to prioritise fire-safety audits for hospitals, factories and other buildings of public importance. “Temperatures are rising rapidly… and much earlier than usual. During such a time, we are seeing increasing incidents of fires in various places – jungles, important buildings and hospitals – in the past days,” the prime minister said.

In addition to dump yard fires, blazes have also broken out in forested areas in the northern parts of the country and in areas around Mumbai.

Since April 1, over 500 forest fires have been reported in Himachal Pradesh alone damaging 3,575 hectares and causing ₹92 lakh of damage. Earlier this week a fire was also reported at a slum in Haryana’s Manesar, in which one person was killed. The India Meteorological Department forecasts heat wave conditions in the east, central and northwest – which includes Delhi – over the next five days and flagged risks to the health of infants, elderly and people with chronic diseases.