It’s Time For Fiscal Discipline
- 23-Jun-2021
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The Government should stop exploiting oil prices to shore up revenue. While every graph of economic indicator is nose-diving, oil prices and inflation are defying gravity. This month, diesel also breached the Rs 100-mark in Rajasthan. In seven States, petrol is selling for more than Rs 100. This is indeed not a good sign for economy.
Manufacturing is down, employment is low, and so is the purchasing power of the common man. The petrol-diesel prices put an extra burden on him. Oil prices push the prices further up as these have a cascading effect on economy. The Government is in no mood to relent. Moreover, volatility in the international market limits its options. These two factors are responsible for putting the fuel prices on fire. The prices were hiked 43 times this year. This has indeed helped the Government collect more revenue.
The excise collection during April-November 2020 was at Rs 1,96,342 crore, up from Rs 1,32,899 crore during the same period in 2019. The central taxes increased from Rs 10.39 in May 2014 to Rs 32.9 in June 2021. This explains the dynamics of oil pricing. Before Modi Government, crude oil price constituted two-thirds of the fuel price, now taxes have taken that spot. The central and State Government taxes account for nearly 54 per cent of its cost.
The Government is justifying the high excise on petrol and diesel by saying that it needs money to spend on welfare schemes. Petroleum Minister Dharmendra Pradhan concedes that it is problematic for people, though quickly adding that the Government spent Rs 35,000 crore on vaccines. So, apparently the logic is that people who drive should foot the bill.
But then it is not only the cars and bikes that consume petrol and diesel. The trucks that carry freight and diesel pump sets that push water into the fields also run on diesel. That was one reason that diesel was always priced less but that consideration has been done away with. This naturally translates into higher input costs for farmers and a higher cost of farm products. However, adjusting excise and other taxes could control the fuel prices. Fiscal discipline is missing in the Government.
