Sky rocketing prices

With rise in global crude, India has been badly hit by soaring prices of petrol and diesel both of which have broken the Rs.100- barrier. Petrol and diesel prices were again increased by 80 paise per litre each on Thursday, resulting in a total increase of Rs 10/litre in the last 16 days. The fuel prices have been revised consecutively for the 14th time in the last two weeks. In Parliament, the Opposition on had demanded a rollback in the hike in prices of fuel and cooking gas and sought a statement from Prime Minister Narendra Modi on the floor of the House over the issue. The Opposition members also dismissed the contention of the government that the rise in prices was due to the Russia-Ukraine war. The contention of the opposition is that the sky rocketing prices are not only due to global price but VAT and Excise duties imposed by the Centre. Two-thirds of what a person pays at the petrol pump consists of Central excise and state value added tax. India has, as a result, the highest tax rates on fuel compared to any other country in the world. The Congress on March 27, attacked the government after fuel prices were increased for the fifth time in six days, and demanded that it should give an account of the Rs 26 lakh crore “accrued” through excise duty on petrol and diesel in about eight years. Senior Congress leader Shashi Tharoor on April 7 accused the Centre of driving away the focus from fuel price rise and consumer inflation, saying that though Lok Sabha passed a bill on Weapons of Mass Destruction, the government’s real strength is its “weapons of mass distraction”. Tharoor in a twitter said that instead of adjourning Parliament two days early, the government should have had the courage to listen to a serious debate on fuel price rise and consumer inflation. In May 2014 when UPA left office and NDA under Modi took power, the cost of the Indian basket of crude oil stood at $113 per barrel. However, within six months by January 2015, the crude oil price fell to $50 per barrel. It also further crashed to $29 in January 2016. However, the Modi government did not slash prices to help customers. It may also be recalled, that while the COVID-19 pandemic pushed several into penury, the Modi government between March and May 2020 raised excise duty on petrol by Rs 13 per litre and diesel by Rs 15 per litre. In fact, due to the pandemic, the price of India’s crude basket crashed to $19 in April 2020. The government has refused to bring petrol and diesel under GST because if it did, then their prices under the present circumstances will become substantially cheaper. The GST regime provides five different taxation rates of 0, 5, 12, 18 and 28 per cent. Currently over 69% of cost on Petrol and diesel is through VAT and Excise etc. If they are brought under GST the tax cannot be below/more than 28 per cent. Prices of almost every item in the market is showing an upward trend and if this is not arrested, it would spark serious economic problems. Central and state taxes accounted for over 69% of retail fuel and handily beating even highly-taxed European economies; indeed an achievement of sorts.