Oil prices are at an all-time high and while it may not have generated the same political slugfest that price rises in the past have caused, because there has been no formal announcement to protest against, the effect on the end user remains the same.
In the past, the governments used to blame high international oil prices for forcing their hand to raise the prices of fuel in a bid to prevent the mounting losses of state-owned oil companies.
This time, however, it is different. The prices are unusually high despite international crude prices on account of the high levies of excise duty and VAT that the central and state governments continue to impose on the sale of fuel. When the international crude prices had fallen to all-time lows a few years ago, the government used the opportunity to hike the various levies in a bid to cash in on the low prices and fill their coffers without a burden on the public.
Since then, however, international crude prices have risen almost to earlier levels but the govt has not withdrawn its hiked levies making prices for the end user very high.
The Centre and states both have their share of taxes on petroleum products. Currently, the central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel. States have value added tax or VAT that vary from state to state.
The government’s claim that it will not cut the excise duty on fuel as informed by Economic Affairs Secy Subhash Chandra Garg because price of fuel is not high enough is an inadequate response. According to Garg, every rupee cut in excise duty on petrol and diesel will result in a revenue loss of Rs 13,000 crore.
One can’t help but notice that when the political situation demands reduction in taxes or levies, the Centre or the GST council is only too happy to reduce rates as per wishes of politicians.
As an example, the GST council reduced the rate of GST to be applied to restaurant bills from 18% to 5% just ahead of the Gujarat elections. It must be remembered that prior to the new GST regime, the VAT on restaurant bills was fixed at around 14% without much fuss, but owing to the 5% hike through GST, which caused a political uproar, not only did the council reverse the hike, the brought it to 5% causing a huge loss to both central and state government coffers. States like Goa which depend on the taxes from restaurants were badly hit.
If the govt can do it for restaurants, which affects only those who can afford to eat out, why can’t they do it for fuel prices when a reduction will benefit not only those who own vehicles but prices of everything especially agri commodities.
The government must simply learn to raise revenues through other means.
