From the front: Want a federation or a centralized India? all you need to know,,!

From the front: Want a federation or a centralized India?

On May 21, the finance minister said the central government had decided to reduce excise duty on petrol by Rs 8 per liter and diesel by Rs 6 per liter.

The Center hopes that the states will dance to its tune. But the federal power of the country is the states that have their own independent existence.

I wrote last week that center-state relations have never been as bad as they are now. Another controversy arose shortly after. That is: Who is in the forefront of tax cuts? Is the center a state?

On May 21, the finance minister said the central government had decided to reduce excise duty on petrol by Rs 8 per liter and diesel by Rs 6 per liter. His notification was released very late at night. All the news channels that day and all the newspapers the next morning reported that the excise duty had been reduced (the center shares this charge with the states). But they are wrong; In fact, the additional excise duty (which the center does not share with the states) has been reduced.

On May 22, the finance minister tried to persuade the states, “I reduced the tariff, now you reduce the VAT.” It’s kind of straightforward. He said the Center has no right to ask the states to reduce VAT on petrol and diesel in view of the manner in which the Center has reduced the surcharge on petrol and diesel and thereby reduced the rates of petrol and diesel.

The numbers are not lying

Let us first analyze ‘Darakapati’. The Center receives huge revenue from additional excise duty (also known as Roads and Infrastructure Cess or RIC), Special Excess Excise Tariff (SAED) and Agricultural and Infrastructure Development Cess (AIDC). The center does not share it with the states. In May 2014, excise duty was levied at Rs 9.48 per liter on petrol and Rs 3.56 per liter on diesel. Until May 21, 2022, the Center has fixed the excise duty on petrol at Rs 27.90 per liter and on diesel at Rs 21.80 per liter. That means the center has increased Rs 18 per liter in these seven years!

The central government gets 59 per cent share in the share tax revenue as per the percentage fixed by the financial community and the remaining 41 per cent is received by all the states. From petroleum products, all states get 57.4 paise per liter of petrol and 73.8 paise per liter of diesel! This means that states do not receive any profit or loss from the basic excise duty.

Therefore, the distributed excise duty is not a real source of revenue for the states. On May 21, 2022, the Finance Minister increased petrol and diesel rates by Rs 18 and reduced them by Rs 8 and Rs 6 per liter, respectively. I call it Rob Peter Moore and Peter Les Pay! That is, he can steal well beforehand, remove everything he has, eat peanuts if he can, and put two or three coins in his hand.

VAT is the main source of income

It is clear that the revenue to the Center from petrol and diesel will not go to the states. Therefore, the main source of revenue for the states is VAT on petrol and diesel (another source is tax on alcohol). It is important to note that states’ own sources of revenue are declining in line with total revenue. So encouraging states to reduce VAT on petrol and diesel is like asking states to beg. So their financial situation deteriorates and they have to borrow more (with the permission of the central government of course) or go to the center door begging for more grants. States are deprived of even the minimum financial freedom. However, four states – Tamil Nadu, Kerala, Maharashtra and Rajasthan – have reduced their VAT rates:

Need a review

In this regard, experts say there should be a comprehensive review of all economic aspects of relations between the Center and the state. In particular, the performance of Articles 246A, 269A and 279A relating to the Goods and Services Tax Act should be reviewed. States should have more economic rights to develop their own resources. The fact is that states that do not have adequate sources of revenue do not provide adequate funding for urban and rural local bodies. As a result the 73rd and 74th Amendments do not make sense. Due to all this, corporations and panchayats are not getting funds, jobs are not coming and office bearers are not coming.

The virtual monopoly of economic power in the hands of the central government led to the centralization of other powers of the central government. The center violated the statutory jurisdiction of the states (such as agricultural laws). The Center has exceeded its tax powers (for example, the Integrated Goods and Services Tax on Shipping – IGST as stated by the Supreme Court). The Center has often used its executive powers to remove the executive powers of the state governments (for example, transferring the Chief Secretary of West Bengal on the day of his retirement and ‘appointing’ other areas where the concerned officer can govern and the states learn from it. The aim of the various policies pursued by the Center is to bring uniformity across the country. (E.g., thrush, thrush, thrush) .There is a sharp decline in federal principles. There is a danger that the Union of India will end and India will become a centralized state.

So now you decide, what do you want? Is India a federation of states at the center, working together in all respects, same states in all respects, or competing, cooperative, healthy states competing with each other?

See Excise duty deducted from the original shared excise duty and additional excise duty (not shared):

Basic Excise Duty Additional Excise Duty All excise duties

(Roads and Infrastructure Cess)

Per liter (shared) per liter (not shared)

On May 21st

Petrol Rs.1.40 13.00 27.90

Diesel 1.80 8.00 21.80

After May 21st

Petrol 1.40 5.00 19.90

Diesel 1.80 2.00 15.80


Twitter: chPchidambaram_IN

Web Title: Samorchya Bakavarun P Chidambaram Central India Federal State Independent Existence ysh

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2022-05-28 18:32:00

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