Who set petrol, diesel prices on fire?

   By Vijay Darda | 03-05-2022

The common man is least bothered about the Central and states’ share in the tax, he just wants relief

Vijay Darda

Indian state fuel retailers have increased petrol prices almost daily since the curtains fell on key Assembly elections including that in Uttar Pradesh and there is no abatement in the prices which are setting new records every day.

Although in November last year, when the Central government reduced the tax, people received some quick relief. But on the basis of previous experience, people predicted that the prices would skyrocket once the elections were over. That’s what happened too! However, people had an expectation that no government, be it Central or state, would be so ruthless as to not control the prices!

There is no doubt that since November 2021, crude oil prices in the international market have increased by $35 per barrel. If there is an increase of Re 1 per barrel in the international market, the prices of petrol and diesel in India increase by 55 to 60 paise per litre. It is obvious that the voter would have become angry, so the prices were reined in. When the Central government whittled down the excise duty, the BJP ruled states too reduced VAT but the calculation was not that easy. A minimum amount of tax was fixed. People got relief but not as much as they should have. Most of the non-BJP ruled states have refused to reduce VAT. Broadly speaking, on an average, the tax on petrol and diesel is up to 46 per cent. This hefty tax has set the fuel prices on fire.

The matter has assumed such grave proportions that last week when Prime Minister Narendra Modi had called a meeting of the chief ministers of the states to discuss the coronavirus epidemic, he raised the issue of petrol and diesel instead and requested the chief ministers to reduce VAT to give relief to the people. He also said that 42 per cent of the tax received by the Centre also goes to the states. Of course, Maharashtra chief minister Uddhav Thackeray and West Bengal chief minister Mamata Banerjee as well as chief ministers of other non-BJP ruled states lost temper. The verbal duel broke over whether the Centre is charging more tax or the states are charging more? However, the Central government figures say that the states which cut VAT, suffered a loss of Rs 23,265 crore and the states which did not reduce VAT earned an additional income of Rs 12,441 crore. Maharashtra (Rs 3,472 crore) and Tamil Nadu (Rs 2,924 crore) have earned the highest revenue. The figures also show that in Maharashtra, Andhra Pradesh and Telangana, taxes are higher than the Central excise duty. The figures I have got from Maharashtra are shocking. In Mumbai, Navi Mumbai, Thane and Aurangabad, in addition to 26 per cent VAT on petrol, hefty additional tax is imposed and on diesel too,  24 per cent VAT, besides additional tax is levied. There is no rosy picture in the rest of Maharashtra either as 25 per cent VAT is levied on petrol and 21 per cent on diesel. But why is this so? I have cited an example of Maharashtra and the situation is no different in other states.

Union petroleum minister Hardeep Singh Puri even tried to explain by tweeting how non-BJP ruled states are recovering higher prices from the people. He wrote on Twitter that VAT in BJP ruled states is from Rs 14.50 to Rs 17.50 per litre, while the same in other states ranges from Rs 26 to Rs 32 per litre. It is natural that the people should ask as to why the rate of VAT cannot be the same in all the states? The states have their own pain point to deal with, like how will they function if they do not levy VAT? The states’ sources of income are very less. Most of the states are burdened with debt. To run the government, populist decisions like free electricity, free food grains, free education, and free treatment also have to be taken, for which money is needed. Leaks create more problems in the system. There are few states which can handle the situation. Along with this, it is necessary to have some money in the treasury for emergency expenses. How will all this be taken care of if they do not charge VAT? Data from the Petroleum Planning and Analysis Cell shows that there is no state tax on petrol and diesel in Lakshadweep. In Andaman and Nicobar, only one per cent VAT is charged. Experts say that other states cannot do this because their needs are greater.

Economists say that the thinking of the governments is erroneous. The management method itself is messed up. Projects are not completed in time and the cost of the project increases manifold. I raised this issue continuously during the 18 years of my parliamentary tenure and told the government that if all the projects were completed on time, the country would stand to gain immensely.

Prime Minister Narendra Modi has understood this issue in its depth and has prepared a list of important projects so that they can be completed within the stipulated period and the cost does not escalate.

As far as giving relief to the people is concerned, it is worth recalling that the road cess was implemented on petrol and diesel during Atalji’s time for the construction of roads. This cess has kept on increasing. On the other hand, a substantial toll tax is also being collected. Why levy cess when you are collecting toll? But this question is not allowed to come up. Sometimes it seems that there is no intention to give relief to the common man. The question is that when the GST system has been accepted for taxes and its results are good too, why not include petrol and diesel in it? I have always said that a country should have one tax system. Let the Centre and the state take at one go whatever tax they want to levy. Likewise, we should also adopt the policy of one nation, one card. The multipurpose card should incorporate the features of Aadhaar and PAN cards. Everything should ideally be included in one card but I don’t understand why our governments don’t pay attention to it!

The government must do something!

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