- The fuel prices viz. petrol and diesel are consistently headed northwards over the last few weeks is stating the obvious pinching the common man more profusely than others. The reason is of course the rising crude oil prices as the Indian basket of crude has increased 50 percent this year to around $ 74 a barrel. As a direct consequence, the spiralling price on the fuel front is playing havoc with the common citizens, especially poor and marginalized, unable to lead a dignified existence coming on the back of the pandemic-induced duress. As such, rising crude oil prices combining with weak economic growth impulses should worry policymakers.
PC: Google
- However, the Government of India’s economic mandarins sees the evolving situation as an opportunity to boost tax revenue. Keen followers of news headlines would have noticed what the Chief Economic Advisor said in a recent interview about how India’s fuel taxed do not stand out when compared to international levels, particularly citing Western Europe and Japan to buttress his statement. Make no mistake, his statement bears scrutiny realistically and holistically keeping in mind our country’s diverse and varied landscape. Note that retail prices of petrol and diesel are way above the norm because of exorbitant taxes.
- For instance, petrol supplied to Delhi’s dealers at Rs.41.39 a litre costs the consumers Rs.101.58 because of 145% mark-up mainly on account of central and state taxes. Comparing these numbers with other countries which are positioned far higher on the economic ladder as also possessing much better public transport is not only questionable but also illogical. Unlike European and other countries that have received generous fiscal transfers during the pandemic are comfortably leading lives, whereas most Indians have not received similar benefits save for subsistence doles in the form of free ration.
PC: TOM STONE
- No wonder, the fuel price increase has played a disproportionate role in stoking inflation further making life miserable for the common man at the bottom of the ladder. Also, spiralling fuel costs are feeding into input costs in critical industrial production further heating up the inflation. This far from the desired trend has come in the backdrop of weakness in aggregate demand. One need not be an economist to comprehend that a solid increase in demand is yet to take shape as the economy continues to remain slack despite a growth projection of 9.5% for the fiscal.
- This is large because of weak demand and not one of a scorching economy. And the major reason is high fuel taxes hurting the marginal and the poor which in turn is slowing down domestic demand substantially. It is reported that spending is being reallocated from groceries to fuel which bodes ill for the economy seeking revival. Almost half of the urban workers employed in the battered services and constructions sectors are at the receiving end. Therefore, it is imperative the Government authorities cut fuel taxes without any further delay enabling money to remain in the hands of consumers. Act fast, and now!
