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Why should you pay Rs 79 for that litre of petrol which costs the govt Rs 31?

Neeraj Thakur | Updated on: 12 September 2017, 18:52 IST

Mumbaikars had a moment of pride on Monday: they paid Rs 79.14 for a litre of petrol – the highest, since August 2014. Delhiites lagged behind a bit, but still it was Rs 70.03 – the highest since January 2017

Wonder what’s there to be proud about? Consider this: 

In August 2014, when petrol was at above Rs 70, India’s basket of international crude oil cost $103.86 (Rs 6,326.11) per barrel. In September 2017 though that has come down to$53.39 (Rs 3,418). 

Petroleum Minister Dharmendra Pradhan recently said the current daily price revision regime was “in the interest of the consumers”. But evidently, Indians are paying the same as they were in 2014, though crude oil prices were 85% higher then. 

In the Narendra Modi regime, the philosophy of economic reforms of the last two decades has coalesced with the duties-of-a-nationalist narrative.The middle class is expected to be off subsidies in this second innings of the National Democratic Alliance (NDA) at the Centre. 

According to this government, India has been held back from becoming a developed nation by the subsidies given to the middle class. 

So God save that middle class Indian who – even in a subdued voice – demands subsidy today. Really, who would want to be held responsible for India’s backwardness! 

It’s another matter that our subsidies would hardly measure up to global standards. 

At the cost of sounding subsidy-hungry, freebie-lover anti-national, every middle class person who buys fuel for his/her small vehicle from government-owned fuel stations, must ask one question: “Why am I paying Rs 79 for a litre of petrol when it costs the government only about Rs 31?” 

The cost of every litre of crude oil that goes to the refineries of oil marketing companies (Indian Oil, Hindustan Petroleum, Bharat Petroleum) is just Rs 21.50 (as of September). 

The cost of refining that crude oil with items like entry tax, refinery processing, landing cost and other operational costs, along with margins, OMC margin, transportation, freight cost etc adds to Rs 9.34. This means that the basic cost of petrol, after adding refining cost should not be more than Rs 30.84. 

The rest is tax. So the proud Indian middle class is paying Rs 48.30 just in taxes for every litre of petrol. Between November 2014 and now, the Centre has raised the excise duty on petrol by 126%. That though pales in comparison with the whopping 374% jump in duty on diesel, the fuel used by lakhs of truckers and farmers. 

“We are largely a tax non-compliant society,” Union Finance Minister Arun Jaitley rued in his Budget speech this year, referring to those not paying their direct taxes. 

Who did he have in mind? Certainly it could not have been the middle class, which is largely salaried: for them, their tax is deducted at the source by their employer. 

But if we believe Jaitley, the country has solved the problem of tax avoidance thanks to demonetisation: “Those dealing in cash were now (post demonetisation) compelled to deposit notes. The anonymity with cash is now gone,” he said. 

As of August, there was an increase of 25% in filing of income-tax returns. Advance tax collection went up 41%. 

The middle class would be more than willing to trust Jaitley's claims on the success of demonetisation, the eradication of black money, the increase in tax compliance by evaders etc. Raising questions over the fall in GDP post demonetisation requires one to understand “technical reasons” (read Amit Shah on GDP). 

The middle class has neither the time nor the courage to ask tough questions to a nationalist government. But, when people have begun to pay direct taxes, black money generation has been curtailed, and the economic transaction have gone digital, does the government have the moral right to keep fuel prices high by making taxes 79% of its total retail cost? 

State government's, too, have a large share in this pelf generated from the pockets of the middle class. But it was the Centre’s deal with the states to keep petrol and diesal prices out of the Goods and Services Tax (GST) regime – a gateway to exploit the middle class for many years to come. 

To cut this long whine short. If, according to the government, every problem in the economy has been solved over the past three years, why should a father who drops his daughter to school in the morning on a motorbike pay 79% tax on petrol? Why should a farmer's cost of using a tractor be higher at a time when he is struggling to deal with the damages caused by demonetisation announced just before the rabi sowing season. 

And, if any economic expert wants to throw “why should the rich SUV owners get cheap diesel” argument, he better ask the government to increase taxes on SUVs rather than milking the middle class and farmers by extorting money on fuel prices. 

The government has no moral right to exploit a class in the name of development, even as all its policies since coming to power have devastated the lives of millions. 

In 2014 and 2015 when the price of crude fell to a 12-year-low at less than $50, the government’s decision to increase taxes on petrol and diesel could be accepted as the government was expected to do something good with that money. 

But now when we know how that windfall gain was squandered in the hope of another bounty through demonetisation, there is a case to gather courage to say: “Life is a lemon,( Mr Jaitley) and I want my money back.” 

Edited by Joyjeet Das 

First published: 12 September 2017, 18:52 IST
Neeraj Thakur @neerajthakur2

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