With the fall in Rupee and steep rise in petroleum products in the recent times, the public is gradually losing patience. In fact, the opposition did try to cash in by calling a ‘Bharat Bandh’. After the deregulation of petroleum product prices the government at the Center has clearly said that all is happening due to external factors and they have no control over it. However, the Center has assured that a ‘re-look’ to include petroleum products under the Goods and services Taxes (GST) can be done.
Former finance minister, Yashwant Sinha said, “In over four years, this government did not face any challenges on the economic management front. This is the first time that an increase in petroleum crude price is causing some problem. This should have been anticipated and the steps should have been taken in time to tackle the problem when it arose but the Union government was clearly sleeping. With the rise in crude prices it has put pressure on various fronts. Now, the Rupee is going down against Dollar, this should have been clearly anticipated because the Turkish currency Lira was also under pressure and so are the other countries.”
The problem is further accentuated because India buys most of its crude oil from abroad which is about 80 per cent or more. All is traded in terms of Dollar and therefore any change in dollar-rupee equity will affect the petroleum companies. Also the petroleum companies have now been allowed to factor in the depreciation of the Rupee as well as the rise in good prices and that is the reason why petrol, diesel, gas prices are going up each day and quite substantially. Earlier, the policy followed by the government was, that if on any account or for any reason, there was pressure on petroleum product prices, then the burden was distributed three ways. Part of which was borne by petroleum companies, the government through deduction in taxes and part of which was borne by the consumer. Hence the consumer experienced the burden by only one third.
“The government was very lucky that when it came into office in May 2014, Petroleum crude prices crashed globally and came down from something like 105 dollars per barrel to about 25 dollars and this gave the government an advantage of lakhs of crores of rupees .The government did not pass on this benefit to the consumer then. Every time petroleum crude prices declined, it absorbed the profit for itself by raising taxes. So naturally now taxes are sky high and the government in order to not disturb its fiscal balance is not reducing tax. Earlier this was done, to bring relief to the consumers, now the central government is not inclined to do it. This is a very mulish attitude. They should certainly look at it and I will still recommend that the government should reduce taxes so that the burden on the consumers is reduced,” added Sinha.
When asked whether the petroleum products should be brought under the ambit of GST, Sinha said, “It can be brought under GST and there should be a discussion, because there are state taxes also. Tax could be fixed at an appropriate level under GST, but another thing one must remember is, that the tax levied by the centre on petroleum products is ad valorem, so every time the crude prices go up the government taxes also goes up. The solution is that the government should reduce its taxes and provide immediate relief to the consumer. The government has already made a lot of money through taxation over the last four years. The government should control the depreciation of the rupee and they should not allow speculators to take over the exchange market.”
President of Manufacturing Association of Information Technology (MAIT), Nitin Kunkoleinker is of the opinion that the fall in currency is now a global phenomenon. “The fall in the value of Rupee against Dollar hurts the importers most. Indian importers must renegotiate with their suppliers. It may temporarily affect the already signed contracts but that is part of the trade. We need to make India an export based economy and strengthen our Make in India efforts and make is export oriented to protect ourselves from the fluctuating currencies. Also, subsidies for export oriented units must be curtailed as the ultimate benefit will go to the consumers outside India. We need to participate in the global value chains and participate in the world market. India is signatory to many free trade agreements (FTA) and we should take advantage of it. Indian exporters are not competitive and all want subsidies. It is time that we move out of this mindset,” said Kunkoleinker.
On petroleum products price rise, Kunkoleinker said, “We need to ask the petroleum companies on their archaic logistic channels which is highly inefficient and we taxpayers suffer in terms of cost. It is time that these companies too are privatised with a regulator and similar terms what the telecom industry is now undergoing. There is high cost of employees, corruption and inefficient distribution channels which continues from the days of protected economy. Closer home, Goa government in order to become very popular reduced VAT on petroleum products but at the same time, it increased taxes heavily on other fields like, house tax, stamp duties etc. Actually, the per capita tax on every Goan has gone up substantially.”
President of the Goa Chambers of Commerce and Industry (GCCI), Sandip Bhandare when asked on how Goa will be affected, said that so far it has not but if this kind of a trend continues, there will be inflation and it will affect all.
Bhandare added that, “because Goa is dependent more on the logistics portion of the same, the rise in petroleum products will be much more in Goa than in the rest of the states. Some of the states have already decreased the VAT and hence everyone is now waiting for the Centre to take an action. The falling rupee and the rising price of the petroleum products is a cause of worry not only for India but also for Goa .Goa to an extent will be affected much more because the raw materials are brought from outside the state and the finished products are exported outside the state. The government which is of course aware of the situation needs to take immediate, corrective steps either by reducing the price of the petroleum products or perhaps looking for measures to stabilise the Rupees against Dollar.”
