Political Diary

New Delhi, 23 February 2021

Dharam Sankat Vs Raj Dharma

NDA SKIDS ON SLIPPERY OIL

By Poonam I Kaushish

Ok, fellow countrymen let lose the volley of expletives, curse all you want of how rotten the State of Denmark is. As prices of petrol and diesel go through the roof breaching the Rs 100 per litre mark and Rs 83 in many parts of the country. A straight 15th day hike and the largest daily increase since oil companies started to revise rates on a daily basis in 2017. Thereby adding to the escalating woes of the aam aadmi in Atmanirbhar Bharat!

But it’s like water off a ducks back even as Finance Minister Sitharaman dismissed it as a “Dharam Sankat, a vexatious issue in which no answer other than price cut will be able to please the public. The Centre and States will have to together work out a mechanism to bring retail rates to reasonable levels.” While Petroleum Minister Pradhan fobbed it as being due to “less fuel production by manufacturing countries to gain more profit”. Sic.

Predictably, a comatose Opposition tried hard to pin the Government down to cut prices but failed as most of its criticism is on social media with little support from the ground. The Congress Chief Sonia Gandhi and cahoots alleged economic mismanagement asserting, “The Government needs to exercise “Raj Dharam” and immediately rollback the increase and stop blaming previous regimes for its economic “mismanagement.” Only to receive a royal ignore.

However, these outpourings of caring are just an eyewash for common people because no Government is willing to change the reality of the aam aadmi crippled by aamdani adhani karcha rupiya and engulfed in an inferno of soaring prices not only in petrol, diesel but also vegetable, atta, cheeni and oil prices and still higher inflation.

Put it down to the economics of politics. Trust our leaders to work on the premise that people need mobility so even if they rave and rant they will shell out any price to go from point A to B. Bluntly, stop whining and swallow the bitter pill. Conveniently, forgetting that they are the culprits as tax on petroleum is a cash cow for the Government, thanks to huge Centre and State taxes.

Shockingly, prices have increased despite moderate cost of international crude oil. Think. Sixty one per cent of the retail selling price of petrol and about 56 per cent of diesel goes as excise duty and value-added tax, the remaining 40% is the price of crude oil. Out of total tax of Rs 63, the Central Government’s net share is Rs 32.9 per litre of excise duty on petrol and Rs 31.80 a litre on diesel. The States overall share of taxes comes to Rs 25.

Besides, the Central Government has replaced excise duty component with various cess (Road & Infra Cess and Agriculture Infrastructure and Development Cess, AID) resulting in lesser devolution to States from the Consolidated Fund of India even though the collection has increased. In fact, we pay one of the highest taxes on fuel in the world.

Agreed, it is sound economics to make the consumer pay for what he is buying. However, it would have been better if price revisions had taken care of curbing the lavish and wasteful consumption of petro-products by Ministers and officers through official vehicles. Scandalously, the Government accounts for 60 per cent of the consumption of petroleum products and is the largest spender. 

A babu is plied to work and back in Government vehicles. While in office, the official car is sent home to ferry his kids to school then take is wife shopping or to lunches, followed by tuitions etc. In the evening the couple steps out for dinner or entertainment. All at the tax payers expense.

Has anyone studied its end result? Will this rise be able to keep the fiscal deficit in check? No. On the other hand the actual impact, working through a multiplier effect, will be far greater than the direct increase estimated by the Government. Rising fuel prices will not only make life difficult for the vulnerable citizens but also trigger off a cost-push spiral. Everyone knows that any attempt to control deficit financing through increase in prices of essential commodities is at once dangerous and suicidal, both economically and politically.

Amidst the pandemic and ensuing misery, forget eradicating garibi, the country is witnessing systematic erosion of  jobs, widespread unemployment, wage reductions and job losses, high prices along-with erosion of incomes and household income. Add to this the daily grind of the middle class and those at the margins which is compounded by runaway inflation and an unprecedented rise in price of transportation leading to rise in price of goods, household items and essential commodities.

Moreover, with petrol price increasing 10 times in the last three years and continuing to increase, it has added fuel to fire. By severely impacting poor people because poor households spend more than half of their income on food and only a tenth on fuel. Thereby, resulting in a chain reaction which will push more people into poverty.

Bringing things to such a pass that in some places people are walking extra miles to buy cheaper fuel or smuggling it from neighbouring countries. A recent report indicated that some people in Bihar’s Araria and Kishanganj region are crossing the border to smuggle petrol from Nepal. Mera Bharat is indeed Mahan!

Also, even when international crude oil prices plummeted last year due to lower demand, we continued to pay higher rates due to the various taxes levied. For the record, India imports over 85% of its oil requirements and 53% of gas to meet its needs.

Pertinently, petrol and diesel prices were deregulated in 2010 and 2014 respectively but it is a case of deregulation over papers only. Deregulation means the retail price of commodities should be moving in tandem (though not in exact proportion) to the changes in global price. However, both Centre and State Governments have considered a southward movement in crude price as an opportunity to hike taxes.

Undeniably, the Government needs resources to run welfare schemes, create infrastructure facilities and development work to generate more jobs, more so in the wake of Covid. Simultaneously, it is the Government’s job to maintain a balance between different classes of taxpayers. Sadly, this balance is missing.

Alas, the people’s nightmares will continue as the Centre increasingly looks to ride on the fuel bounty to make up for the fiscal hurt caused by Covid. Clearly, both the Centre and States need to remember Governments are elected for the people, to ease their burden and not work contrary to their wellbeing. If they fail to do so, they will have to face the brunt of the aam aadmi’s anger. Time now for our leaders to use their moral compass and stop profiteering from its citizens’ misery.  ----- INFA

(Copyright, India News and Feature Alliance)