Petroleum product price rise seems to be a never ending phenomenon. The woes for the common man, are here to stay. Apart from all states imposing Value Added Tax (VAT) and gradually increasing it as per their fiscal pressure subject to the failures in other revenue sources, it is the best and easiest mode of for gobbling up the dipping revenue. Apart from this, there is the exorbitant sales tax, central excise duty, cess etc, which leaves petrol and diesel prices in India one of the highest in the world.
For instance in Goa, in March 2017 there was a 15 per cent hike in VAT on fuel. Subsequently in September last year the VAT of 15 per cent was hiked by another two per cent to make it 17 per cent. However, prior to this, the Goa government had kept petrol prices below Rs 60 per litre during 2012-17 by reducing the VAT on it. Very few States do take this “self moratorium” step. It is especially commendable that the step of not raising petrol price beyond Rs 60 per litre was taken during the mining ban, which had virtually crippled Goa’s revenue source. The prices of petrol in Goa are significantly lower compared to the neighbouring states of Karnataka and Maharashtra, much to the delight of the districts bordering Goa.
A national debate is on at the moment why Goods and Services Tax (GST) has not been implemented on petroleum products. Finance Minister Arun Jaitley has already mentioned that the Central government favours bringing petrol products under the GST umbrella, but the states, mainly the GST Council has to agree. In fact many of the States are not willing to get this done as the source for revenue will be cropped.
State like Maharashtra charge 40 per cent VAT on petrol while Andaman and Nicobar Islands charges just 6 per cent and Goa 17 per cent. The effective sales tax on diesel ranges from 6 per cent to 29 per cent. With each hike in petroleum products, the main argument, which is now given by the state-owned petroleum companies, is that the crude oil prices are going up. However, when the crude oil prices dipped to a record low in recent times, the effective cut in petroleum prices was not to be seen in India.
There is a direct co-relation with crude oil prices and revenue of the States. Each hike in crude oil price brings more revenue to the States. The Centre charges a fixed amount of Rs 19.48 per litre of petrol and Rs 15.33 on diesel across the country. The total levies put together are nearly 60 per cent and if the central levy and dealers commission is added, the amount goes up to nearly 100 per cent over the real cost of fuel. Now, if petroleum is included in GST, then the Revenue Neutral Rate (RNR) could be as high as 100 per cent which will not be accepted in India as most of the States are battling revenue deficit since GST regime.
The Centre having already reduced the basic excise duty on petrol and diesel by Rs 2 a litre last year, the Central government is unlikely to take any further benevolent steps. Any further cut may lower revenue collections and disturb its plans to maintain fiscal deficit at 3.2 per cent.
This means that the bottom line is that there is not going to be any relief in the offing for the common man. Petrol prices are likely to go up further as the Karnataka elections has recently concluded and many analysts are predicting that with the continuous rise in crude oil prices, the petrol price may go up by Rs 4 per litre in the coming days.
