Profiteering policy

 Prices of petrol and diesel have increased 25 times in 2021 and there appears to be no let up as the government is reluctant to lighten the burden on the consumers. There is no doubt that governments run on taxes but when taxes keep going up, they turn predatory and start to hurt people they claim to serve. Massive taxes on petroleum products are hurting household budgets and transportation costs are impacting the profitability of small businesses. The only logic that explains government’s obstinacy in bringing down tax rates is it wants to keep the fiscal deficit numbers to the lowest level possible. Finance Minister Nirmala Seetharaman justified the hikes saying that the oil companies fix the prices, not the government but that is only partially correct. The oil marketing companies are raising prices only because crude prices are going up but the increase is only marginal and prices will not come down unless the taxes come down. The significant hikes were particularly felt during COVID induced lockdown from Marh 25.2020. That was when the round of high taxes on petroleum products started as an emergency measure as tax collections from all other sources had dried up. During global pandemic, international crude oil prices had also crashed but oil marketing companies were continuing to make windfall profits. This prompted the government to raise excise duty on petrol by Rs 13 per litre and diesel by Rs 16 a litre. What appeared to have started out as an exercise to take profit away from the Oil marketing companies, instead ended in downright excessive taxation as retail prices for petrol have gone up by almost Rs 20 per litre since March 2020,at a time when crude prices were at the historic lows. To understand the quantum of taxes, it may be pointed out that in May 2014 when the price of petrol made 2/3rd of the price, both state and central taxes added to about 32% with dealer commission at around 3%. This changed significantly in February 2021 as the commodity itself is 36% of the total price while central taxes make 37% of the costs and total state and central taxes has gone up to a massive 60%. At global price, the price of petrol itself has come down by 32%, while the effective rate of tax has gone up from 47% in 2014 to a massive 167% now. The Centre’s tax (basic excise, surcharge, agri-infra cess and road/infra cess) is currently Rs 31.83/litre for diesel and Rs 32.98/litre for petrol. Former union finance minister P Chidambaram said, “Government is poor, it needs more taxes. Oil companies are poor, they need better prices.” Congress interim president Sonia Gandhi in a letter on February 21 to prime minister Narendra Modi accused his government of profiteering amidst the slowing down of economy, job losses, inflation. Gandhi said that the Centre has increased excise duty on diesel by 820 per cent and on petrol by 258 per cent and collected upwards of Rs.21 lakh crore in the last six and a half years. What appears undeniable is that both the government as well as the oil marketing companies are making huge profits through a symbiotic relationship. Having hiked excise on fuel by Rs.10, the central government is depriving the economically burdened citizens of benefits and giving billions of rupees to corporate houses.