February 14, 2016
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Iniquitous Taxes on Petrol and Diesel

IN the month of January alone, there have been three rounds of increase in excise duties by the central government on petrol and diesel. These increases amounted to Rs 2.12 per litre of petrol and Rs 5.5 per litre of diesel. So far there have been nine hikes in excise duties since November 2014, as a result of which the total excise duty of petrol went up by Rs 11.77 and diesel by Rs 13.37 per litre respectively. These hikes have come in the background of the big drop in the international oil prices. From July 2014 to January 2016, there has been a drop of 75 percent in the international oil prices. Since India imports 80 percent of its fuel requirements, this should have resulted in a big decrease in the retail prices of petrol and diesel for the Indian consumers. But this has not happened. The Indian retail prices are double the global price of oil. The reason for this is that the Modi government has appropriated most of the fall in oil prices through increase in excise duties without passing on the benefit to consumers. It is estimated that in this fiscal year, the government will get increased revenue of Rs 17,400 crore through the successive hikes in excise duties on petroleum products. There have been only small cuts in the retail price of petrol and diesel since the global oil prices have declined. After the government removed administered prices for petroleum products, the retail price is supposed to reflect the market price. But by administering hikes in excise duties, the steep fall in oil prices have benefited the oil companies both public sector and private which have added to their margins and the government which has siphoned off the price fall through additional taxes. The worst sufferers are the common people. If the retail prices of petrol and diesel had fallen in tune with the global prices, it would have helped dampen inflation and price rise. For instance, the price of diesel would have been Rs 32 instead of Rs 44 (Delhi prices). This would have brought down the cost of transportation and would have had its impact on the prices of essential commodities including food items. Instead of passing off the benefits to the common people, the government has now sought to increase its revenue through taxation to bridge the budgetary deficit. The iniquitous burden of taxation can be seen by the fact that out of the price of one litre of petrol, 57 percent comprises taxes by the government. For diesel, 55 percent of the retail price is tax. At a time when food prices are on the upswing and when two successive years of drought will further put pressure on consumer food prices, the government’s selfish approach of garnering the fall in global oil prices is anti-people and shortsighted. Before the union budget is placed, there should be a strong demand that the successive hikes in excise duties on petrol and diesel be withdrawn and the government find other ways to raise revenues. Speaking about government revenue, successive governments have been handing out tax concessions and exemptions to the corporates and rich individuals. According to the official figures, Rs 5.89 lakh crore worth of taxes were foregone in this manner, in 2014-15. Much of the tax foregone has benefited the big companies and industrial houses. Another way public money is squandered is the write off of bad debts by the nationalised banks. According to the latest information made available to The Indian Express newspaper, 29 state-owned banks wrote off a total of Rs 1.14 lakh crore between the financial years 2013 to 2015. The banks have not provided details of the companies or individuals whose loans were written off but it is well-known that the bulk of the “non-performing assets” are owed by companies and capitalists. If the finance minister wants to raise revenues to bridge the fiscal deficit, he should do away with the tax exemptions and concessions to the corporates and the affluent sections, recover the loans to the companies and affluent sections and not burden the people by adding taxes on the retail prices of petrol and diesel. (February 10, 2016)