Shshank Khajuria
The price of premium petrol in India has crossed the Rs 100 per litre mark in a few cities and a litre of normal petrol now costs over Rs 90. Though the Consumer Price Index (CPI)-based inflation rate is within the mandated rate, the rise in fuel prices has started pinching the common man. This is because a rise in petroleum prices has a cascading effect on the economy but if there is a downward revision in prices, we hardly witness a corresponding price adjustment by suppliers or service providers. Petrol and diesel prices were deregulated in 2010 and 2014 respectively, but in reality it is a case of deregulation on paper only. Deregulation means that the retail value of commodities should move in tandem (though not in exact proportion) with the changes in global prices. However, both the Centre and State Governments take the southward movement in crude prices as an opportunity to hike taxes. In other words, consumers are asked to bear the burden when there is hike in crude prices but taxes are levied when there is fall in prices. In Delhi, the overall tax incidence on petrol was Rs 22 in 2014 which touched Rs 53 in February 2020. The Central Government has replaced the excise duty component with various cess (Road and Infra Cess, Agriculture Infrastructure and Development Cess and AID) resulting in lesser devolution to States from the consolidated fund of India, even though collection has increased.
Out of the total tax of Rs 53, the Centre’s net share is Rs 28 and Rs 25 goes to the States, including Rs 5.1 revenue devolution from the Centre. Tax on petroleum has become a cash cow for governments and discussions about bringing this under the ambit of the Goods and Services Tax (GST) is just an eyewash because no Government would like to do so.
The above facts are reinforced by the Budget data released by the Government which shows that the central excise collection for 2020-21 has increased from Rs 2,67,000 crore of the Budget Estimate (BE) to Rs 3,61,000 crore in the Revised Estimates (RE). An increase of Rs 94,000 crore in tax collection as compared to the BE shows the immorality of our policymakers, given the fact that tax incidence is to be borne by consumers whose livelihoods were impacted by the COVID-19 outbreak.
Time and again social media posts are circulated citing repayment of loans by the NDA Government as a reason behind high fuel prices. As a matter of fact, oil bonds worth just Rs 3,500 crore have been redeemed so far and that, too, in 2015. There can be another argument that the rupee has depreciated and, therefore, importers have to pay a higher amount in rupee terms. All these arguments look good when they come from the Government or functionaries of the ruling party but appear puerile when given by analysts. There is no denying that the Government needs resources to run welfare schemes and create infrastructure facilities. However, it is the job of the Government to maintain a balance between different classes of taxpayers. Sadly, this balance is missing and it can be vouched by the fact that the corporate sector has received major benefits like tax rate reduction, abolition of dividend distribution tax (DDT) and so on. But various tax incentives available to the middle class were withdrawn gradually. Abolishing DDT for corporates but taxing dividend, capital gains and now even interest on Provident Fund of salaried persons shows that the decision-makers are least concerned about the pains of the middle class.
Policymakers and economic advisors in governments should be sceptical of their choices. A Government is for the people and if ruling parties at the Centre and in the States lose touch with the masses then they will meet the same fate as the Congress Party. There are laws to check profiteering by business entities but there is nothing except a moral compass to stop governments from profiteering at the expense of citizens.
(The writer is a chartered accountant and public policy analyst. The views expressed are personal.)
