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Slash levies on petroleum
June, 16th 2008

The knee-jerk increase in the prices of petroleum products ~ petrol, diesel and LPG ~ could have been reduced, if not contained, by slashing or withdrawing all taxes on them both at the central and state levels. This would have given some relief to middle-class consumers who have been labouring under the impact of rising prices of essential commodities for several months. Perhaps the government figured it would not have been economically feasible to withdraw taxes and cesses since that would have drained the national and state exchequers and adversely affected development programmes.

Several states, including the three controlled by the CPI-M ~ West Bengal, Kerala and Tripura ~ slashed sales tax on petrol and diesel, although not on LPG, within a day of the Centre foisting a steep hike in the prices of petroleum products on the people. Common sense says the United Progressive Alliance (UPA) government increased the prices after receiving a go-head from the Left. That is why the Left governments could move so quickly to cut sales tax cut and earn points for easing the peoples burden. Left governments are now projecting themselves as pro-people.

If the Congress government in Delhi could reduce cooking gas prices by Rs 40 per cylinder with a package of tax cuts and subsidies, why couldnt other state governments do the same to give relief to consumers? It is outrageous that chief ministers of BJP-ruled states are defying the diktat of their party president, Mr Rajnath Singh, to cut sales tax, with Assembly elections imminent. At least two states, Uttarakhand and Karnataka, have ruled out tax cuts.

The price hike will lead to additional earnings for the public sector oil marketing companies to the tune of Rs 21,123 crore. This amount could have been mobilised to provide relief to these companies. To cite an example, the Centre is collecting a cess of Rs 7,500 crore annually from ONGC and Oil India Limited under the Oil Industry Development Act, 1974, which is not being used for the development of the petroleum sector. This can be used to create a price stabilisation fund to compensate the oil companies.

At the same time, Prime Minister Manmohan Singh should have issued an order prohibiting his ministerial colleagues and officials from flying out of India for some time to come, instead of making an apologetic appeal.

The price hike of petroleum products has highlighted the dilemma created by the growth-inflation dichotomy. Trends indicate that the days of double-digit inflation are not far away.
9 June, Kolkata.

Too steep
The international price of crude oil is rising and has recently reached a record high of $139 per barrel. It is also true that India has little oil resources of its own and has to depend upon imported oil. It is understandable that the UPA government has raised fuel prices. The central and state governments have imposed a 57 per cent tax by way of import duty, sales tax and other cesses. If the central and state governments had given due consideration to people reeling from the effects of inflation and cut taxes, there would have been no need to increase fuel prices so steeply.
11 June, Budge Budge.

The central government and the West Bengal government share a symbiotic relationship. CPI-M leaders enact high drama, bitterly criticise the decision of the Centre to hike fuel prices and call bandhs to protest the hike. But their relationship with the Centre remains intact. The Centre has failed to control the rising prices of essential commodities, but the CPI-M hasnt pointed a finger.
9 June, Kolkata.

White Paper
It is perhaps uncharitable to expect the central government not to hike the prices of petroleum products, given the steep rise in the price of crude oil from less than $60 a barrel in January 2007 to over $130 now. Does any party in power want to commit hara kiri in a pre-election year? Taxing fuel is an important source of revenue. A major part of this is used for development activities or welfare measures.

In view of the rise of prices of crude oil in the global market it was no longer possible for the central government to absorb the shock and defer a hike. The central government appears to have been pushed to the wall with no alternative but to impose a moderate price hike in petrol and diesel prices though, of course, the hike in LPG prices was not so mild.
The point, however, is that the blow could have been softened by appropriate reduction of levies on petroleum products both by the Centre and state governments so that people, reeling under inflationary pressure, could have got some relief.
Passing on the hardship to the people should not be a one-way traffic. Ministers and bureaucrats should share the burden by curtailing wasteful expenditure. The people have a right to know how the revenue so far earned through oil revenue has been utilised for welfare work.
A White Paper from the central and state governments is urgently required.
10 June, Kolkata.

No option
It is unwise to blame the governments decision to raise the prices of petroleum products even though it may have upset the people, who are trying to deal with spiralling prices of almost everything. India is neither a big oil-producing country nor is it rich in natural gas. It has to import.

Domestic price of petrol, diesel and LPG depends on two factors ~ international prices and subsidy. With prices rising, oil companies suffered losses and the government was shouldering the burden of a huge subsidy.
9 June, Burdwan.

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