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Tax Cuts Will Not Help Tackle Inflation: Pranab Defends

  • Finance minister Pranab Mukherjee maintains that inflation in India was due to turmoil in global economies.In his defence against a backlash from opposition parties, finance minister Pranab Mukherjee said that slashing taxes is no solution to tackling price rise.“State governments generate more tax revenue on fuel prices than the centre,”  Pranab Mukherjee said while defending the government on the issue of inflation in the Parliament.The speech hovered largely around prices of petroleum prices.He highlighted that prices of oil have increased from well below $ 25 per barrel to $ 110 per barrel over the past ten years. “It is not possible to put under-recoveries of Rs 1,32,000 crore under any carpet,” he added. 
  • State-owned oil companies are selling oil cheap to retail Indian consumers despite having to pay market-linked prices for importing them.He also said that the the rupee has fallen in value against the US dollar due to global factors. He indirectly blamed US for its quantitive easing policy that created a global inflationary trend.Mukherjee told the upper house of the Parliament that under recoveries, (the difference between the imported price or cost to oil companies like state-owned ONGC, HPCL and BPCL and the retail price) per litre of diesel and kerosene was Rs 10.62 and Rs 25 per litre respective. For the domestic gas cylinder it was Rs 260.50.
  • Mukherjee said that the centre’s total tax revenue stands at Rs 1,36,497 crore from all petroleum product taxes. Acccording to the finance commission’s recommendations, the centre is giving 30 per cent of the revenue to states. States on their own impose taxes aggregating Rs 89,000 crore. He argued that this made states the biggest beneficiaries of taxes on petro products.India consumes 108 m barrels of oil each year and has to import about 78 m barrers since the domestic production  is only 30m barrels. Earlier in the day, the opposition attacked the government on the issue of price rise. Leading the charge, BJP leader Sushma Swaraj said that the problem of inflation was due to government’s flawed policies and corruption.

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