Alleging that the inaction by the Punjab government to bring VAT on petrol and diesel on a par with neighbouring states is causing huge revenue losses running into hundreds of crores annually on account of diversion of business and smuggling, the Petrol Pump Dealers’ Association of Punjab (PPDAP) has announced a statewide agitation in the form of an indefinite hunger strike from tomorrow to press for an immediate cut in VAT rates and an inquiry to expose the nexus between smugglers and Excise and Taxation Department officials.
Petrol Pump Dealers’ Association of Punjab President Paramjit Singh Doaba warned that if the Punjab government does not heed to their demands, they would intensify their protest by shutting down petrol pumps across the state. We have submitted numerous representations to the government, but it has turned a deaf ear to our pleas, leaving us with no choice but to resort to an agitation,” he said.
Claiming that the unreasonably high VAT on petrol and diesel in Punjab is a scam of enormous proportions to the tune of Rs 40,000 crore, PPDAP Spokesperson G.S. Chawla said, “Rather than adding to Punjab’s revenue receipts, a higher VAT has set the state exchequer back by a whopping Rs 40,000 crore in the past 17 years. The disparity in VAT in comparison to neighbouring Haryana, Himachal Pradesh and Chandigarh is causing the Punjab government revenue losses to the tune of Rs 2,000 crore per annum. Matters have now gone from bad to worse with Punjab’s revenue from VAT on petrol and diesel declining by Rs 190 crore in the first half of 2017-18 in comparison to the corresponding period last year.”
Chawla alleged that this huge scam in Punjab is being operated at the behest of excise and taxation authorities. “The only beneficiaries of this losing proposition are the excise and taxation authorities and unscrupulous elements, including dealers, who continue to work in collusion to rob Punjab of its rightful revenue through diversion of business to neighbouring states and smuggling. Not only are people of the state paying more, the government is also suffering losses as its rightful revenue is not reaching it at all,” he said.
Explaining how petrol and diesel is being smuggled into Punjab from neighbouring states with impunity right under the Punjab government’s nose, Chawla said “Unscrupulous dealers are smuggling lower priced petrol and diesel from the neighbouring states and selling them at market price in Punjab without paying any VAT to the state government. Milk tankers are being used to smuggle them in bulk. Since these supplies have no records, the illegal business does not reflect in sales figures at all. So, a heavier VAT on petroleum products will not translate into extra revenue, as is being made out by excise and taxation department authorities in a tacit understanding with unscrupulous dealers.”
The PPDAP Spokesperson said this open scam is going on unabated at the cost of the state exchequer and the businesses of petrol pump dealers across Punjab. “It is also threatening the livelihood of thousands of petrol pump employees across the state. Our profits have diminished to the extent that we are staring at staff lay-offs. With the present earnings, it has become very difficult for us to retain the current staff strength. We hope the government realises that a situation like this one can defeat its avowed objective of creating jobs and increasing revenues,” he said.
Pointing out that a lower VAT in the state will attract an additional revenue of Rs 2,000 crore per year by bringing smuggling to an end and pushing up sales as a result of reversal in shift of trade to neighbouring states, Chawla said the Petroleum Planning and Analysis Cell has conducted an exhaustive study to arrive at the conclusion that if VAT and other state levies on petrol in Punjab are reduced from 37.54 per cent to 25 per cent, there will be a loss of 12.54% on the face of it, but the sales will go up by a whopping 100 per cent.
Elaborating on how this figure has been worked out, the PPDAP Spokesperson said, “Let’s go 16 years back when VAT on petrol and diesel in Punjab was comparable with other states and Punjab’s petrol sales were growing at a rate of 10% per annum during the 1991-2000 period. While in 1999-2000, Haryana sold less than half the quantity of petrol (2.34 lakh kilolitres) as compared to Punjab (5.74 lakh kilolitres), the position changed dramatically in 15 years with Haryana, where petrol is cheaper by Rs 6, overtaking Punjab by recording a growth of 400% in sales as compared to 50% growth registered by Punjab in 2014-2015. If by reducing VAT we create the conditions for a 10% growth trend in Punjab again, as was prevailing in 1991-2000, the state would be selling double the petrol it is selling now, which translates into 100 per cent growth.”
Pointing towards a mismatch between the growth in the number of vehicles and the declining growth in petrol and diesel sales in Punjab to drive his point home, Chawla said, “While the number of two-wheelers sold in Punjab is 20% higher as compared to Haryana, the growth in petrol sales in Punjab has been just 4 per cent in stark contrast to Haryana (15.9 per cent), which is four times more. If the number of two-wheelers in Punjab has gone up three times in the past 10 years, why is Haryana selling more petrol?”
Expressing surprise how Haryana, with less than half the consumption of petrol than Punjab till 15 years ago, has now overtaken Punjab despite having a lower vehicular density, Chawla said diesel sales also present a dismal picture. “While diesel sales in Punjab and Haryana were comparable in 1999-2000, the position has now changed dramatically in favour of Haryana, which sold 50 per cent more diesel than Punjab in 2016-17.”
The PPDAP Spokesperson said it was a serious matter that there had been a decline in Punjab’s revenue growth from petrol and diesel in the last six months despite the increase in their prices. “When the increase in crude oil prices has led a corresponding increase in retail prices, it should have led to an increase in VAT collections, too. On the contrary, the state’s revenue from VAT has declined by Rs 190 crore in the first half of 2017-18 in comparison to the corresponding period last year. This clearly indicates that the sales have declined. How is this possible when Punjab has a higher population, capita income and vehicular density than its better performing neighbouring states?” asked Chawla.
Interestingly, petrol pump owners in districts which share no border with any state are also recording decline in sales. “The moot question here is that why have the sales declined in these districts where the shift in business factor is non-existent. The sole reason for this is smuggling from neighbouring states, a trend which has been on the rise with the rising fuel prices in the past six months or so,” said Chawla.
He demanded that Punjab should have a single consolidated tax like Haryana and other states instead of additional levies like infrastructure cess because whenever there is an upward revision in price, the taxes further widen the gap with adjoining states.
Explaining how diesel sales have become a losing proposition for pump owners in Punjab, Chawla said, “The consumption of diesel in Punjab has substantially gone down due to better availability of power and the flight of industry to other states. This leaves us with the transport sector as the largest consumer of diesel in the state, but not ready to cough up more, even they refuel their tanks from neighbouring states now.”
The PPDAP Spokesperson said that while the disparity in petrol and diesel prices has particularly hit the businesses of petrol pump owners in the border districts of Sangrur, Patiala, Bathinda, Gurdaspur, Mohali, Fathegarh Sahib, Ropar, Hoshiarpur, Gurdaspur and Mansa, Mohali is the worst affected as it borders Chandigarh, where petrol has become cheaper by Rs 8.24 per litre and diesel by Rs 2.23 per litre since the UT administration reduced VAT on both the petroleum products by 5 per cent nearly three months ago without any exigency or justifiable reason. “I have been suffering big losses as my pump in Phase VII, Mohali is right next to Chandigarh. Most of my previous customers now refuel their tanks from the nearest pump in Chandigarh,” he said.
Questioning the rationale behind the Chandigarh administration’s decision to drastically reduce VAT, Chawla said the VAT cut is contradictory to the UT administration’s move of increasing road tax up to half of the price of vehicles. “If they really wanted to reduce traffic congestion, as they go about claiming, they would have done something to promote public transport instead of reducing VAT, which is only contributing to more traffic by encouraging people to use their own vehicles more often than not. The VAT cut is nothing more than an incentive to filling stations in Chandigarh to register more sales and an open invitation to not only daily commuters but also tractor trolleys, trucks and bulk industry users from the adjoining Mohali district to refuel their tanks from Chandigarh, which is only adding to the traffic congestion in the UT,” he said.
Chawla pointed out that the diversion of trade is hitting the businesses of pumps in Mohali, thus endangering the livelihood of the staff employed by them. “There are about 400 filling stations within a 20-km radius of Chandigarh which provide livelihood to at least 4,000 workers. Is it not grossly unfair to make 400 dealers suffer at the behest of 40? The excise and taxation authorities, in collusion with the powers that be and a handful of dealers, have taken undue advantage of a general advisory of the Petroleum Minister to reduce VAT. The outcome is evident. While diesel sales in Chandigarh increased substantially by 57 per cent in December 2017, Mohali recorded a 3.3 per cent decline in sales. It is no coincidence that the per outlet sales of Chandigarh are among the highest in India and those of Punjab the lowest,” he said.
Chawla said that much like the previous government, the present Congress regime in the state has also done nothing to bring VAT in Punjab on a par with neighbouring states, although it was part of their election promise. “So as to stop smuggling from neighbouring Haryana, where petrol is cheaper by Rs 6, the Punjab government had, in May, decided to reduce VAT on petrol and diesel to bring parity in prices across the region. But Chief Minister Capt Amarinder Singh, who had himself taken the decision in a meeting with excise and taxation department authorities and even directed them to formulate a draft proposal to this effect for the State Budget, soon backtracked under the influence of senior functionaries of the department, who, with the collusion of unscrupulous dealers, misled the CM by claiming that the move would result in Rs 400-crore losses to the state exchequer annually,” he said.
Requesting the Chief Minister to grill the excise and taxation authorities on the Rs 400-crore losses that they are portraying, the PPDAP Spokesperson said, “Some senior excise and taxation officers are using political push to force an excessively high VAT rate on the people of the state. These senior officers, who report to the CM, have created an impression among those at the helm of affairs that reducing the tax will cause big losses to the already cash-strapped economy. This picture is being repeatedly painted for the past several years as a majority of these officers have a nexus with unscrupulous dealers.”
Chawla recalled that they had witnessed a similar situation when former Deputy Chief Minister Sukhbir Singh Badal was about to slash the VAT rates in March last year. “Despite having persuaded Delhi, Chandigarh, Himachal Pradesh and Haryana to increase VAT with an objective of bringing parity in the rates across the region, the former deputy CM himself did not allow a matching cut in VAT under the influence of excise and taxation officials,” he said.
Chawla said that subsequently, he, joined by other Association members, sat on a hunger strike in April 2016 in protest against the exorbitant VAT in the state. “But we called off the agitation after senior Congress leaders led by former Patiala MP Preneet Kaur assured us that the Congress would effect a desirable cut in VAT if voted to power in Punjab. We have a Congress government now, but things remain the same,” he said.
Reiterating the Association’s resolve to take the fight for the rights of petrol pump dealers to the end, Chawla said, “As a veteran dealer and an elder in the petrol pump owner community, I will lead the fight for the rights of my fraternity till the government meets our demands, even if it is at the risk of my life.”
Notably, in April 2016, too, Chawla had sat on a hunger strike at his pump in Phase VII, Mohali, and was hospitalised on the third day.