Petrol, diesel prices in India higher than most countries: Why govt taxes are extortionist in nature

High petrol and diesel prices are once again in the news. And the reason for this is the high taxes on these fuels, rather than the international crude oil prices. Even as the public anger is palpable on the social media and other forums, there is no indication from the government of its willingness to reduce these taxes. The Times of India has written a hard-hitting editorial on Friday (15 September) on why the government should lower the oil taxes. “International crude oil prices may have halved since the Narendra Modi government assumed office, but it has made practically no difference to the consumer. This anomalous situation encapsulates a misguided taxation policy that has treated the oil sector as government’s cash cow,” it has said. Just two days ago, various newspapers reported that petrol and diesel prices have risen to their highest level in three years. In Mumbai, for example, the capital of a BJP-Shiv Sena governed state, the petrol price was the highest in the country – on Tuesday (12 September), it had inched up to Rs 79.48 per litre. [caption id=“attachment_4045525” align=“alignleft” width=“380”]  Reuters[/caption] Not that this price rise happened overnight. Ever since the Narendra Modi government introduced the daily price revision system of the petroleum products (from mid-June this year) to avoid sudden spikes in prices that caused popular revulsion, cost to the consumer has been going up on a daily basis, albeit in small measure. For example, between 1 July and 12 September, the price of petrol for the common man went up by Rs 5.18 per litre. Similar has been the hike in the diesel prices in Maharashtra. It now costs Rs 62.37 per litre in Mumbai. The residents of Delhi are a shade luckier, for they have to fork out a little less for both petrol and diesel: Rs 70.38 per litre for petrol and Rs 58.72 per litre for diesel (on 12 September). This difference is there because though the excise duty levied by the central government is the same in case of both Maharashtra and Delhi, the value added tax (VAT) charged by the Delhi government is comparatively less than that by the Maharashtra government. Nevertheless the prices of petroleum products in Delhi have correspondingly gone up considerably in the last year due to the massive increase in the central excise duty in this period. During his electoral campaign in 2014, Modi had promised to bring acche din for people of India if he was elected to power. People voted for him; the ‘good’ tidings that have come their way are the exorbitant taxes that the people are forced to pay for their basic needs. Take the petroleum prices: when Modi was attacking the erstwhile Manmohan Singh government for bringing misery to the people in April 2014, the taxes on petrol stood at 34 percent and taxes on diesel were barely 21.5 per cent. But in July 2017, taxes on petrol account for 58 percent and those on diesel have breached 50 percent. How do India’s oil prices compare with that of the US or other western nations? In the US, where the per capita income hovers around $60,000 (in purchasing power parity terms), the average price of the petrol (gasoline, as they call it) is $0.70 dollar per litre (on 11 September). One can find in most developed western nations the price of the petroleum products at the similar level. But then one can argue that rich capitalist nations can afford to keep the petroleum prices low. Then let us take the case of China, a country that we aspire to compete with and beat economically. The per capita income (again in PPP terms) in China is slightly above $15,000 dollars; it sells petroleum products to its citizens at an average price of 6.5 Chinese yuan (1 Chinese yuan equals 0.15 US dollar). That works out to less than a dollar per litre. But take the case of India. Our per capita income, taking purchasing power parity into consideration, is a little above $6,000. But our government sells petroleum products to its citizens at a price of $1.25 (Rs 80 at the current exchange rate). What does it suggest? The clear conclusion is that ours is an extortionist government. It has no parallel in the advanced nations; it has also no parallel among the emerging nations. Our government even turns out to be the worst among the poor south Asian nations. Take the case of Pakistan which many of our ‘hyper-nationalists’ deride as a basket case. There too, the government is more considerate to its citizens than ours. Pakistan, whose per capita income is around $5,500 (less than that of India) sells petrol to its citizens at 71 Pakistani rupees, which works out to just $0.67. Compare this ‘basket case’ with our country which is supposed to be an example of a ‘growth miracle’ nation: our government, though we are a richer nation than Pakistan, imposes almost twice the taxes than what the Pakistani government imposes on its citizens. It is not as if Pakistan’s is an exceptional case. Consider the case of Sri Lanka, Nepal or Bangladesh, our government’s extortion has no match in any other country. The TOI editorial makes this point squarely: “All our neighbours, particularly Pakistan, pass on more benefits to consumers of petrol and diesel. This places Pakistan’s economy on a relatively more competitive footing than India’s, perhaps even countervailing its ‘Jihad’ handicap.” What is the bottom line? That the Indian government imposes a heavier burden on its citizens compared to that of other countries, whether they are richer or poorer nations than India. That is the acche din that Narendra Modi and the BJP had promised Indians in 2014!