Taxes on fuel should be used to fund in­fra­struc­ture projects

Govt must not give in to pres­sure from con­sumers to slash ex­cise du­ties

Business Standard - - OPINION - The In­dian Ex­press, September 15

Petrol and diesel are cur­rently re­tail­ing in Delhi at ~70.39 and ~58.74 a litre, re­spec­tively — or just be­low their cor­re­spond­ing lev­els of ~71.41 and ~56.71/litre on May 26, 2014 when the Naren­dra Modi gov­ern­ment as­sumed of­fice. Given that the av­er­age cost of crude oil im­ported by In­dian re­fin­ers has more than halved dur­ing this pe­riod — from $108.05 to $53.83 a bar­rel — con­sumers have ev­ery rea­son to com­plain. The main rea­son for the crash in in­ter­na­tional oil prices not be­ing passed on to con­sumers has, of course, been the Centre si­mul­ta­ne­ously hik­ing the spe­cific ex­cise duty on both petrol (from ~9.48 to ~21.48/litre) and diesel (from ~3.56 to ~17.33/litre). For a coun­try short of fos­sil fuel re­sources, there is a long-term case for res­train­ing con­sump­tion and pro­mot­ing en­ergy ef­fi­cient pro­duc­tion along­side re­new­able tech­nolo­gies. The Modi gov­ern­ment should, hence, ig­nore pop­ulist pres­sures to slash fuel ex­cise du­ties now.

But it could do two things to partly as­suage con­sumer feel­ings. The first is to con­vert a por­tion — maybe even 50 per cent — of the ex­cise on petrol and diesel into a cess, whose pro­ceeds would be used solely to fund rail­ways, metro, high­ways, ir­ri­ga­tion, port and other in­fra­struc­ture projects. Se­condly, sim­ply al­low­ing oil mar­ket­ing com­pa­nies to make au­to­matic price ad­just­ments to im­port par­ity lev­els on a daily ba­sis isn’t dereg­u­la­tion. The mar­ket needs to be thrown open to in­de­pen­dent fuel re­tail­ers, who would source petrol and diesel from where it is cheap­est, rather than from cap­tive re­finer­ies.

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