Free Press Journal

BJP government overtakes UPA in fuel price hike; petrol and diesel excise duties touch historic high

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New Delhi/Mumbai: There is no let-up in the cheating and looting in the garb of petrol and diesel hike – a direct fallout of more than 50 percent tax levied on the two fuels.

According to one estimate, excise duty on petrol has gone up by 105.49 per cent while on diesel it has shot up by over 240 per cent. Interestingly, the only time duties were cut was by Rs 2 per litre last October in the run-up to the assembly elections in Gujarat. As against this, the excise on jet fuel as a component of price was just 14%.

The extent of ‘loot’ can also be gauged from the  fact that on petrol the Narendra Modi-led NDA government collects Rs 10 per litre excise duty more than what the Manmohan Singh-led UPA government was collecting in 2014. On diesel, the government collects almost Rs 11 per litre more than the previous government.


When the global oil prices were down, the government had not passed on the benefit to the consumer; rather, it hiked excise duty on fuel nine times between November 2014 and January 2016, which was nothing short of ‘cheating.’ Result: The BJP government now has the dubious distinction of overtaking the UPA regime in petrol prices, which have touched a historic high in New Delhi and Mumbai at Rs 76.57 and Rs 84.40 per litre, respectively.

The gap between petrol and diesel prices has also narrowed to such an extent that it no longer makes sense to buy a diesel vehicle. Diesel set a new record across the country on Monday: In Delhi, Kolkata, Mumbai and Chennai, diesel was selling at Rs 67.82, Rs 70.37, Rs 72.21 and Rs 71.59 per litre, respectively. The carriers of public transport run mostly on diesel and the impact on inter-state movement of perishable and imperishable commodities can well be imagined.

With price of global crude going through the roof, the only way to scale down prices is a reduction in taxes. But, for a long time, the Centre has been conveniently taking the plea that states need to bring down their own taxes to make the fuels cheaper. But it is apparent the states are not willing to oblige given the booty that flows into their coffers. Kerala Finance Minister Thomas Issac has suggested a simple solution to bring down the raging petrol prices to Rs 60 a litre. “Let the central government give up the 300 percent tax increase they imposed since BJP came to power.’’

The saddest aspect is that the government could well have reined in the prices by cutting excise but it missed the bus when the prices were down. Now, the fiscal situation is such that it does not permit any such generosity. And certainly not in the run-up to the general election. The BJP government is surely in a trap, unless it takes a bold step like reducing the GST. The oddity is that countries which buy petrol from India are selling it at a price lower than India.

FUEL ON FIRE

WHY CHEATED? When global oil price was down, there was no relief; rather, excise duty was hiked on fuel NINE times between Nov 2014 and January 2016.

EXCISE LOOT: Excise duty on petrol up by 105.49 % while on diesel it has shot up by 240 % in BJP regime.

WHAT GOVT MAKES: While refineries produce petrol at Rs 37.19 a litre, state and central government together made Rs 35.76 for every litre of petrol sold.

HIGHER THAN IN UPA: NDA government collects Rs 10 per litre excise duty more than what the UPA government was collecting in 2014.

RETAIL RATES: After daily revision was introduced, in less than a year, retail rates have gone up by Rs 11.09 per litre. (As on May 21)

WHY EXCISE CAN’T BE REDUCED: Fiscal situation does not permit such generosity; will get worse in run up to election.

IMPACT: Plays havoc with household budgets; leads to higher inflation and higher trade deficit; puts undue pressure on balance of payments.

IMPACT ON POLICY: Turns hawkish, which impacts private investment.

TAX IN US/PAK: The US levies tax of 17 % on fuel while Pak taxes petrol at 23.5 %.

SOLUTION

Only sustainable solution is if fuels come under GST

TO IMPACT IMPORTS

Even though oil is now considered less of an independent driver of business cycles than before, the State Bank of India on Monday said the recent surge in crude oil prices is likely to impact the country’s imports and stretch the ongoing fiscal’s current account deficit (CAD) to 2.5 per cent of the GDP. It is feared that if the trend persists, economic growth will hit a hump.