The 'real' relief

Petrol and diesel prices have touched the century mark in nearly half of the Indian states and it is stinging the middle classes the most. Sikkim and Madhya Pradesh are the new entrants to the list of states where petrol and diesel prices have gone higher than Rs 100. Certainly, it is not just about these petroleum products — the ripple has had a fluctuating influence on the prices of all the daily utility material. The increased transportation cost on account of the fuel price hike is deeply costing the pockets of people. At a time when the entire nation — with an overwhelming number of middle and low-income groups — is struggling to come out of the ravages of the pandemic, the obvious course of measure that was expected was financial support to the millions. The failure of both the Centre and state governments to address, or even acknowledge, the shortcoming on the policy front stands contrary to the need of the hour. As the pockets of common masses are burdened on a daily basis, no scale of other monetary support could ease their pain; it will nullify any government effort to aid its distressed citizens. The resolving of the issue must be seen in the light of urgency as the rising numbers are badly hitting people on a daily basis. The Finance Minister has almost expressed the government's helplessness in the matter as she clarified that the price hikes are mainly on account of rising international oil prices that have touched around USD 75 per barrel. She cleared the Centre's involvement by saying that the varying prices in the states are a result of the Value Added Tax imposed by the states. The rise of fuel prices can roughly be related to certain factors including — the rise of international oil prices, VAT imposed by the states, excise duty imposed by the Centre and the value of rupee against the dollar. While the international prices and the value of rupee remain beyond the control of the governments, the other two factors can be considered given the extraordinary situation we are in. The excise duty for petrol stands today at Rs 32.98 per litre and that for diesel is Rs 31.8 per litre. These numbers have come a long way since 2014 when the excise duty on petrol was 9.48 per litre and that on diesel was Rs 3.56 per litre. Between the years 2014 and 2016, excise duty was raised to take advantage of the plummeting international oil prices — this effectively means at that time the consumers were not getting affected adversely as the prices were low and the government was making good money at that time. But, as the prices rose again, deduction in excise duty didn't come in. This means that the Central Government is still mopping up the same revenue it used to do when the international oil prices were low, but the effect of increased prices is being mostly braced by the people. In 2019-20, the revenue mopped by the government from taxes on petrol and diesel was around Rs 2,13,000 and which reached close to Rs three lakhs in the next fiscal. The revenue figures are about 4-5 times of what used to be before the increase in excise duty before 2014. It has been observed in the past few years that the revenues from petrol and diesel have risen despite the reduced sale of the fuels. While the increase in revenue is a good and important thing as more money in governments' coffers could mean more support for citizens, but that support will make little sense if they are forced into distress from the other side. It is time when Central and state governments must forgo their revenues and consider subsidising the fuels. This would mean some real, direct and meaningful relief for the distressed millions. It will also help the governments perform their responsibility of tackling the pandemic in a smoother way. For the time being, the government may consider raising revenues from corporate taxes and other alternatives. The Central government must take on board all the state governments and come out with a comprehensive solution. This issue should not be left to linger for long.