The revenue loss of ₹2.2 lakh crore (200 Billion) due to two rounds of duty cuts on petrol and diesel will be borne entirely by the central government, Union finance minister Nirmala Sitharaman said on Sunday, refuting accusations by the Opposition that the reductions were made on the portion of levies that is shared with the states.
“The excise duty reduction of ₹ 8/litre on petrol and ₹6/litre on diesel (effective from today) has entirely been made in Road & Infrastructure Cess (RIC). Even in November ‘21, the reduction of ₹ 5/litre in petrol and ₹ 10/litre in diesel was entirely made in RIC,” the finance minister said in a Twitter thread on Sunday.
Revenue from the roads and infrastructure cess is not shared with the states.
After the government announced significant cuts in fuel taxes on Saturday to tame inflation, the Opposition had alleged that reducing central levies on auto fuels would proportionately shrink the states’ share in the central divisible pool, where 41% of the collected revenue goes to them.
“Basic ED (excise duty) which is sharable with states has not been touched,” Sitharaman tweeted. “Therefore, the entire burden of these two duty cuts (made in Nov, 21 and yesterday) is borne by the Centre.”
The central government on Saturday decided to reduce RIC on petrol from ₹13 a litre to ₹5, and on diesel from ₹8 to ₹2, which became effective from Sunday.
“Although RIC is part of the non-divisible pool, the revenue collected through this cess is utilised by the Centre in infrastructure development in states,” a government official said, requesting anonymity.
The duty reduction made on Saturday has a revenue implication of ₹1 lakh crore a year for the Centre, the finance minister said. “The duty reduction made in November’21 has an implication of ₹1,20,000 cr a year for Centre. Total revenue implication to Centre, on these two duty cuts is thus ₹2,20,000 cr a year,” she said.