Page 14 - June2018

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creases choke Modinomic or what is the economic bring petroleum products within GST’s ambit. This
growth, stoke inflation reminding people of last days incongruous pricing is because of the growing tax
of UPA government, hurt consumers and household burden on petrol and diesel.
budgets. The promised achhe din seem to be paling
in the current season’s heat fueled all the more by Why oil outside Gst?
the fuels on fire. The current spell is inopportune as A Delhi-based consumer pays about 47 per cent tax-
it comes at a time when there are discernible signs es on petrol and more than 37 per cent on diesel. In
of a recovery in economic growth after disruption most of the other states, these levies are higher. Both,
induced by demonetisation. The global economy is the Centre and states have calculatedly kept petrole-
on a rebound but Indian economy seems to be hit on um products outside the GST purview because they
the wrong side because of oil price hike. are cash cows. Local levies on fuels vary from state
To prevent these fallouts, the immediate solution to state. A permanent solution to this problem, how-
is for governments at all levels to lower taxes and ever, lies in the inclusion of auto fuels under the GST.
to bring out the oil prices under the GST regime so This move will uniformly cap taxes on petrol and die-
that taxes are well defined, uniform and limited. The sel at a maximum of 28 per cent. This is not impossi-
Centre levies a fixed excise duty on petrol and diesel. ble considering the BJP is in power in 20 states while
It used the window provided by the weakening of other non-BJP ruled states would be forced to follow
crude soon after NDA assumed power to raise duty suit in view of forthcoming general elections.
and the result was oil companies, the PSUs came It is a fact that a steep decline in the interna-
out of red and became cash rich. Excise duty on tional oil prices after the BJP came to power made
unbranded petrol was raised nine times and it is now it sanguine. As a result, it was caught unprepared
more than twice the rate which existed when NDA ahead of the Karnataka Assembly elections. Little
came to power. In the case of unbranded diesel, the doubt that immediately after the Karnataka results,
duty is more than four times what existed in mid- the oil companies affected a price hike hurting the
2014. The outcome of an increase in duty has been people. Under a tacit directive, state-run oil retail-
a sharp rise in revenue collections from petro prod- ers froze the daily hike of petrol and diesel prices for
ucts at the cost of consumers or end users. Revenue, almost three weeks, only to recover their losses with
which was 88,600 crore in 2013-14, increased to a vengeance. Instead of mopping benefits of low oil
2,53,254 crore by 2016-17. prices to achieve fiscal deficit targets, the govern-
ment should have created a price stabilization fund
Wither oil prices? to shield consumers from the highly volatile inter-
For sure, the main cause of the current spell of in- national oil market. Another vital reform this sector
crease in retail price is the hardening of internation- requires is an explicable pricing mechanism. The
al crude price which was at their lowest in 2013-14 government has announced that it was looking at a
and suddenly started shooting up in 2017-18. But that permanent and lasting solution but at a time when
should not be an excuse to avoid proactive measures. Modi Government completes its four years on May
The Centre must move to significantly slash excise 26, 2018, people became all the more restive as no
duty. The Modi government should also persuade all steps to contain petrol and diesel prices have so far
states administered by BJP and other parties to lower been announced.
their fuel taxes which are a percentage of an ever- For the record, the Petroleum Minister Dharmen-
increasing retail price. There is a strong mechanism dra Pradhan had earlier said that the government
in Unitary-Federal relations for doing that. This will will intervene to reduce prices.
make it politically difficult for non-BJP states to hold
out. For almost four years, governments have used common man left out
revenue from fuel taxes to offset the fallout of lack- Post Karnataka elections, the clamour grows for a
lustre economic growth. This cushion has allowed cut in central excise duty to bring down skyrocket-
them to postpone much needed economic reforms. ing petrol and diesel prices has grown across the
In the recent past, private consumption expand- country. It may not be forgotten that oil marketing
ed at a disappointing pace. Any measure which puts companies (OMCs) seem to have got the most bang
money in the hands of consumers at this moment for their buck ever since the Modi government came
will push up the growth rate in private consumption. to power. While the rise in fortune for the OMCs in
This expansion will help governments garner more the past four years was mainly on account of lower
tax, not less. A reduction in dependence of fuel taxes crude oil prices. The common man was left out from
will also create an incentive for the GST Council to the party as the government had hiked tax levies on
hasten the pace of reforms, one of which must be to fuel on several occasions. Despite the astounding

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