Work out a solution
The issue of increased fuel prices has been a constant cause of worry and anxiety for a common man. Since the prices have not been showing any decrease, the issue is hitting every sector of the economy as well with prices of essential commodities touching skies.
Now as the clamor for tax cut is gaining momentum the government has come out with a proposal saying that a reduction in taxes can happen only if it is a joint call of the central and state governments.
Interestingly, as much as 60 per cent of the retail price of petrol, which has shot above Rs 100-mark in some places in Rajasthan, Madhya Pradesh and Maharashtra and is at an all-time high elsewhere in the country is made up of central and state taxes. Taxes make up for about 56 per cent of the record high diesel rates. In Srinagar the cost of petrol prices have shot to Rs 94.34 on Saturday with Diesel also hovering at an all time high price.
What is interesting to note is that the Union Finance Minister had increased central excise duty on petrol and diesel by a record margin last year to mop up gains arising from international oil prices plunging to a two-decade low. Since then the governments (both central and the state) have been en-cashing on the miseries of the common man.
Both states and the Centre draw revenue out of taxes levied on petrol and diesel. 41 per cent of the tax collections made by the Centre go to the states and the rest ends up in the coffers of the central government.
However, what the government is missing out on is its lack of interest in addressing the issue. Curtailing the price rise to some extent is well within the reach and authority of the central government. Primarily, it could initiate some relief measures by announcing slashing of some portions of its tax revenue and then states could have followed suit.
If this equation did not go well then the government could have brought fuel prices under the ambit of Goods and Services Tax (GST) regime. The move would end the cascading impact of taxes and bring uniformity.
Currently, the central government levies a fixed rate of excise duty on fuel while states levy different rates of VAT. Under the GST, the two would merge and bring uniformity, solving the problem of fuel rates being higher in states with higher VAT.
Earlier this week, economists at SBI in a report stated that petrol price can go down to Rs 75 a litre across the country if it is brought under the ambit of GST. Diesel will come at Rs 68 a litre and the revenue loss for the Centre and states will be only Rs 1 lakh crore or 0.4 per cent of GDP, according to the calculation by the economists made under the assumption of global crude prices at USD 60 a barrel and exchange rate at Rs 73 per dollar.
Another move that the Union government could have announced is using some of the crude oil out of storage that it had purchased at very cheap rates last year.
India had purchased 16.71 million barrels of crude in April-May, 2020 and filled all the three Strategic Petroleum Reserves created at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka. The average cost of that crude purchase was USD 19 per barrel, according to a written reply filed against a question in the Rajya Sabha on September 21, 2020.
This move would also ensure some relief for the common man who is witnessing shortfall in revenue owing to the slowdown in economy post covid lockdown.
KV Network
