Finance Minister Pranab Mukherjee on Friday rejected in the Lok Sabha demands for rollback of the increase in the prices of petrol and diesel and reduction of excise duties hiked in the budget saying the "financial condition does not permit".
"I would love to respond to the demands (of the opposition members) but my financial condition does not permit me to do so. Please excuse me. Therefore, I am unable to do so," he said replying to a two-day general discussion on the budget for 2010-11.
The entire Opposition including the BJP, Left Parties, SP and RJD walked out protesting against the minister's rejection of their demand. Just after the reply, BJP leader Yashwant Sinha went to ask Mukherjee whether the government would consider withdrawing the "dangerous proposal" of the raise in prices of petroleum products, especially diesel, which he said would lead to cascading effect on prices.
"All of us have demanded it". In his Budget, Mukherjee restored the basic customs duty of 5 per cent on crude, 7.5 per cent on diesel and petrol and 10 per cent on other refined products. He also raised the excise duty on petrol and diesel by Re one per litre each to begin a process of fiscal consolidation.
Immediately, oil companies had raised the prices of petrol and diesel across the country. Besides, the budget also raised excise duty across the board on all non-petroleum products by 2 per cent to 10 per cent and brought in more services in the tax net. After the Minister's reply, the House voted the Appropriation Bill, 2010 enabling withdrawal of Rs 8,35,637 crore (Rs 8356.37 billion) from the Consolidated Fund for vote-on-account expenditure for the first three months of next fiscal.
In his hour-long speech, Mukherjee admitted that the tax proposals in the budget would have some impact on inflation and he put the estimate at 0.41 per cent. "Let us see, how it goes".
"In my tax proposals, I had not imposed a single new tax. What I certainly did was some taxes (which earlier) were rolled out and it was withdrawn as a prelude to the stimulus package in 2009. We had to reduce the rate to revive the economy", he said.
Mukherjee said as part of the stimulus package to revive the economy, the government reduced the excise duty from 14 per cent to 8 per cent in two phases. "This (raising of taxes) I did because I did not opt for any short term or short-sighted policy", he said, justifying the decision to raise taxes.
As part of the tax reforms, the Goods and Services Tax (GST) and the Direct Taxes Code (DTC) were being worked out and the opposition parties which have governments in the states should appreciate and support the Centre. On service tax, he clarified that it would be levied on 33 per cent in case of real estate sector and the impact would be only 3.3 per cent.
Referring to the issue of petrol prices, Mukherjee compared the increases effected during the NDA regime and the current hike. He said during 1998 to 2004, the price of crude per barrel ranged from $12 to 36 but the increase in petroleum price was of the order of 48 per cent on petrol, 112 per cent on diesel and 258 per cent on kerosene.
The price of kerosene went up from Rs 2 to 9 per litre but in the UPA government's time the price has gone up by only 2 per cent. He said during the UPA government's time, the price of crude has gone up from $36 to $184 per barrel at one point and the increase in the prices of petrol was only to the tune of 41 per cent and diesel 63 per cent.
On fiscal deficit, he said, the UPA has a track record of meeting the targets set in the budget estimates, whereas the NDA had slipped in all the six years, except one.
In an apparent attack on Sinha, who was finance minister in 1991 when the country had to pledge gold to overcome balance of payments crisis, Mukherjee referred to revenue mobilisation and said, "we can't live on borrowed funds. I would not like to pledge gold. I cannot indulge in fancy measures."
Sinha then got up to challenge the Minister saying that the two governments had to face different challenges and the situation cannot be compared.
