Economy

Government of India hikes the taxes on retail Petrol & Diesel

This was expected! In the last many years, the Government of India has taken advantage of falling Oil prices by continuously increasing excise duty, helping its coffers. It is conventional wisdom that taxes once raised will never come down, as subsequent budgets use it as the baseline for their revenue planning.

Given the “said to be” poor tax collections due to slowed economy, this excise-duty hike was expected. Yet, I feel this is the time for Government to slash the taxes, spur the spending, and boost the economy which is starting to feel the added pain of Coronavirus as well. We can wish for a lot of things – but they don’t happen!!!

A tax hike on the price of Petrol and Diesel is regressive, the poor bearing the brunt of it. If Government really needs to mop up revenue, they should (temporarily) hike Income Tax – Yes, I will need to pay more, but that will be the fair thing to do to the poor of this country who are going to be the most affected by the slowed economy and the (expected) onslaught of Covid-19.

What a change a decade brings! In this very blog, in 2008 I was urging and supporting the Government of India’s increase in retail prices of Petrol & Diesel.

Impact of COVID-19

In the coming weeks (in a worst-case model told by some experts) India is likely to suffer Coronavirus – the poorest, the day wagers and temporary workers like street vendors, waiters, maids, drivers and truckers are going to lose work and earnings. Not everyone can work from home with a smartphone & 4G connection. With their clout, the labour unions will ensure their members get salaries for days missed due to Government orders to stay away from work – but it is unlikely Government will come to the aid of the unorganized sector.

Add to it the economy is already in critical care for nearly a year (I am not going into the politics of who is at fault here, whether it is the current regime, the previous regime, or even the imperial rulers a whole century ago). The poor pay the heaviest price whenever petrol and diesel are hiked, as every commodity from salt to onion will be impacted.

To be fair, I am not suggesting a Government subsidy like it was done in India till a few years ago – This Government has done the right thing by establishing market linked prices. Subsidy is often misused and leaked in India, it again hurts the poorest of the poor in other ways, often benefiting the middle class (which I am part of).

My submission & hope was that Government of India should’ve been magnanimous and passed this bonanza to the poor at this critical time. And they missed it!

1 Comment

  1. Good to see you have diametrically opposite views in a decade and acknowlwding the same as well. I think even now also you are pretty “excited” about excise duty increase (read the blog again !!:)

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