Financial Daily from THE HINDU group of publications
Thursday, Nov 18, 2004
Industry & Economy - Petroleum
States told to cut ST on petro products Chidambaram's call to contain crude oil-induced inflationary pressures
New Delhi , Nov. 17
THE Finance Minister, Mr P. Chidambaram, today backed the Petroleum Minister, Mr Mani Shankar Aiyar's view that State Governments should lend a helping hand in controlling inflation by lowering sales tax on petroleum products.
"States must take a second look at sales tax on crude and petroleum products. I endorse Mr Mani Shankar Aiyar's appeal to the State Governments in this regard," Mr Chidambaram said in his inaugural address at the Economic Editors' Conference here today.
He pointed out that the main reason for the inflationary pressures was the high petroleum prices caused by the high global prices of crude.
The Minister emphasised that the Centre had already gone in for two rounds of duty cuts and would be wary of going in for similar cuts repeatedly. "We have reduced customs and excise duties on petroleum twice this year and foregone revenues of Rs 4,425 crore. We have to strike a balance between giving up revenue and funding development programmes," he said.
Stating that controlling inflation would continue to be accorded high priority, the Government would intervene through fiscal measures if it spots any "irrational price movements" of commodities, he said. "If there is any irrational price movements of commodities we will watch and take fiscal measures to control it," Mr Chidambaram said.
He said that controlling inflation along with tackling the effects of delayed and deficient monsoons during the year and turbulence in the stocks markets when the United Progressive Alliance (UPA) Government took over have been the three major challenges for the Government.
Stating that the Government has taken measures to address all these challenges, Mr Chidambaram hoped that the economy would grow by over 6 per cent during the current fiscal. ``On the back of last year's 8.2 per cent growth, which was on a low base of 4 per cent in the previous year, any growth rate of over 6 per cent should be considered satisfactory,'' he said.
He said that the Finance Ministry agreed with the Reserve Bank of India's projection that the economy would grow at 6-6.5 per cent in the current fiscal. "This is consistent with our analysis as well,'' he said.
He said that although the economy clocked 7.4 per cent growth in the first quarter of 2004-05, the remaining three quarters might witness `moderate' growth due to the adverse impact of deficient rains in some parts of the country and high oil prices in global markets.
Mr Chidambaram sought to allay fears regarding a much lower level of agriculture output for the year, due to deficient rainfall in certain parts of the country. "Prospects of rabi crop continue to remain favourable, thereby allaying apprehensions regarding a much lower level of agriculture output for the year. Foodgrain stocks at the beginning of November were more than 6 million tonnes higher than the buffer stock norms, indicating comfortable levels of food supplies,'' he said.
Responding to a query, Mr Chidambaram hinted that there was no proposal at present to merge the associate banks of the State Bank of India with the parent bank.
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