Without Any Rationale

Union Finance Minister informed the media the other day that the Government of India has reduced the excise duty on petrol and diesel by Rs 1.5 per liter and asked the companies to also reduce their price to dealer by Rs.1 per liter i.e Rs. 2.5 per liter reduction before VAT. This is too meager a reduction looking at the rates of excise duty and VAT that were before May 2014.

Video clips and write ups have started making rounds on the social media justifying the sky rocketing prices of petrol and diesel. Theese messages  are trying to push the logic that the prices are rising inview of the global  crude price fluctuations and indirect impact of the decline in the status of Rupee vs US Dollar. These facts do not reveal of the whole truth. These write ups subtly seek support for the present government in the upcoming elections.

Although  it is  true that after first falling to even lower the prices half of what they were during the times of UPA rule the crude prices saw a sharp rise during 2017 through 2018 but the fact is prices are still much lower than what they were during UPA tenure.

The factors that have contributed to the price rise are :

1.Since 2014 governments have loaded the petrol & diesel prices with unfair excise duties and taxes .

A review of the 2018 level of Central Excise Duties/ Cess and the VAT on the petrol/ diesel reveals that NDA –II  government has increased the excise duties on the diesel & petrol  as much as  4.87 times that is 487%  (increased from Rs.3.56 to Rs.17.33  per liter ) on diesel  and  Rs. 9 .4  to Rs. 19.48 per liter (Ex. D Rs. 4.48 + Additional Ex. D Rs. 7 + Road Cess Rs. 8 on petrol by 2018.  Earlier it was Rs.21.25 per liter)   as of that as was applicable in 2014 (May) UPA-II rule. So, to be brief Rs. 10 to 12 plus per liter excise duty  has been levied additionally after 2014 on petrol and Rs.13 plus per liter on diesel.

2.The VAT on diesel was more than 20% (highest of only 25% in Chhattisgarh)  in only 10 states in April 2014, where as in August 2017, the VAT on diesel was more than 20% in 15 different states (in August 2017, the highest was 31.06%  in Andhra Pradesh) . The VAT on petrol was at least 25% in 17 different states in April 2014 (highest of 33.06% in Punjab in April 2014) where as in  August 2017 it was  at least 25% in 26 different states.

3. The fall in the Rupee as compared to US $ (as on 03102014 its Rs.73 plus to 1 US$ and blame can not be solely placed on the international trends. Present government has to own the decline.

4. And of course the international crude prices too contribute to the rise and that has to be borne by the consumer. But still the international crude prices are not as high as they were during UPA times.

So, the present governments can roll back the additional excise duty and VAT, imposed after 2014  so with that at least Rs.20 per liter could  be given as relief to the consumer  keeping in view of the fact that even in cities like Srinagar the petrol price on 4th Oct 2018 was Rs.88.23 /liter  and in even in Jammu it was Rs.85.44 per liter and this speaks in itself about the agony of the common man.

Let us not play politics with everything. People pay taxes but to use taxes efficiently is duty of those who are given reins of governance in a democracy.  Going by what people are often found saying the earlier governments were less efficient and also more “corrupt ” but the new government is more efficient in using public revenue and also more honest too. In case we go by such suggestions ” this present ” set up should need less money for doing more work than the earlier one. Should it not ?

The present high price of petrol is not only due to global prices of crude, it is also due to the fact that union Government  has more than doubled the excise duty on petrol  ( 2014 times on petrol and four times on diesel).  All state governments have increased local taxes on fuel  to limits as high as 38  percent in Maharashtra. It is true that government needs tax revenue for public expenditure but it is also true that common man also needs money for running one’s daily chorus after paying direct / indirect taxes.  Government employees and pensioners may not be feeling that much pinch but imagine when a regular government teacher at the lowest level may be getting  Rs 30,000 per month and a Shikshamitr in some states is paid  just Rs 100 or 200 per day (Rs 3000 Per month),  that shows how desperate are employment seekers in India. 

Some messages being circulated are comparing prices with other countries but that too simplistic. One should not ignore that a particular employee in India on an average is paid Rs 50,000 per month, a similar employee in Japan, US or UK is be paid at least three to four times of that amount , so prices in rupees in India cannot compared directly with prices in Japan. May be rational method would be to divide Japan prices at least by 3 (Taking prices in Japan as equivalent of less than Rs 50 per liter for comparison keeping in view paying capacity of the people there). It may not be a news for many that even in US the price in petrol per liter is lower than what it is in Delhi or Mumbai or Jammu.

Let us see how the state governments act as with regard to VAT.

It all boils down to good and efficient governance. God bless us all with good times to come.

 

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