On the day Prime Minister Manmohan Singh sought to take the nation into confidence on why the unpalatable and unpopular decision on fuel price hikes was an economic necessity, Finance Minister P. Chidambaram announced the abolition of import and excise duties on non-subsidised domestic LPG cylinders to provide some relief to consumers from the additional burden.

As part of the reform measures initiated last week to get the economy back on track, the government had raised the price of diesel by over Rs. 5 a litre and capped supply of subsidised cooking gas to six cylinders per household in a full year. Any additional requirement beyond the subsidised six refills per family was to be purchased at the market price of about Rs. 895 per 14.2 kg cylinder.

While Opposition parties took to the streets to voice their protest against the stringent cut-back by the Centre as a measure to contain the burgeoning fuel subsidy bill, certain Congress-ruled States such as Delhi announced the supply of an additional three LPG cylinders at the subsidised rate to each household. In effect, while the Centre is to bear the subsidy on six refills annually, the State government will foot the bill for the remaining three, if required, for each household.

Indicating to the State governments ruled by non-Congress parties to follow suit if they really want to provide relief to households, Mr. Chidambaram waived the duties on even the non-subsidised LPG supplies. “Since some LPG cylinders will not be subsidised, we have amended the notification for the non-subsidised household LPG cylinders... Customs and excise [on them] will be zero,” he said at a press briefing here.

Against the subsidised rate of Rs. 399 per LPG cylinder in Delhi, the refills without subsidy would have cost about Rs. 895. Now, following the abolition of five per cent customs duty and eight per cent excise levy, the consumer price the capital would work out to be about Rs. 97 lower at Rs. 798. However, non-subsidised commercial LPG cylinders would continue to attract both the Central levies.

Mr. Chidambaram said: “I welcome the decision of certain State governments to subsidise three cylinders per year of LPG in addition to six cylinders for which the subsidy would be borne by the Central government... I would commend all State governments to adopt such an approach.”

The Finance Minister also lauded the Bihar government’s decision to reduce VAT (value added tax) on diesel from 18 per cent to 16 per cent which, in effect, would cushion a part of the Rs. 5 a litre price hike.

Arguing that the State governments did have the revenue cushion to provide some relief on their part, Mr. Chidambaram provided details to show that the States netted a total of about Rs. 1,12,723 crore through excise and customs – as part of their share from the Centre – along with state VAT in 2011-12. “We [the Central government] are paying out a huge subsidy on fuel...Therefore, it is not unreasonable to expect that some part of the burden should be borne by the State governments too.”

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