Andhra Pradesh Chief Minister Chandrababu Naidu today became the second Chief Minister to announce a cut in state tax for fuel, which will bring down prices by Rs 2 per litre and cost the exchequer around Rs. 1,120 crore. The reduced prices will be effective tomorrow. The Chief Minister's announcement came as 22 opposition parties are holding a nationwide strike called by the Congress over rising fuel prices and the falling rupee. Mr Naidu's Telugu Desam Party is supporting the strike.
Since oil prices have started rising, following US sanctions on Iraq and the slide of the rupee against the dollar, there have been calls to reduce tax. Yesterday, Rajasthan's Vasundhara Raje had announced a similar cut.
Today, announcing the price cut in the state assembly, the Chief Minister said, "the common man is reeling under the impact of growing prices and I appeal to the Centre to reduce prices".
Oil prices in the country are tied to the cost of crude oil in international market. But over it, both Centre and the states levy taxes. A reduction in retail prices can happen only if excise duty is reduced -- in which case the Centre and state governments bear the loss, or the oil firms bear it directly.
In Andhra Pradesh, the Value added tax or VAT has been among the highest anywhere -- 35.77 per cent for petrol, next only to Maharashtra and Madhya Pradesh, and 28.08 per cent for diesel, the highest in the country.
While Rajasthan is going to polls by the end of this year, Andhra Pradesh is set to go to polls by April-May 2019. Mr Naidu targeted the ruling BJP at the Centre, saying they are increasing collections with excise and other taxes but not passing on any relief to the ordinary Indian.
Today, Union minister and senior BJP leader Ravi Shankar Prasad said the rising fuel prices were a "momentary trouble".
"Diesel, petrol price rise is out of our hands because oil producing countries have limited production," the minister said, adding, "We're not saying we can't do anything. We're saying this is a momentary trouble".