In one year, the petrol prices have increased five times, Prime minister Manmohan Singh does not want to interfere with the freedom of the oil companies to fix the retail prices. So what is the way out?
In one year, the petrol prices have increased five times. The average cost per litre has gone up by Rs.17. Prime minister Manmohan Singh does not want to interfere with the freedom of the oil companies to fix the retail prices. So what is the way out? Are consumers condemned to suffer these hikes?
No, say experts in the field, especially bureaucrats who have served in the petroleum sector. “The real culprit for the burden on the people is not the volatility of the crude prices in the international market. But the high level of taxation that is prevalent in the petroleum sector. It depends on the state in which you buy petrol. In some cities, the tax component could be as high as 50 per cent,” said a former petroleum ministry official.
According to budgetary figures, the central government pocketed Rs112,000 crore from this sector during the 2009-10 fiscal year. And the states got Rs72,000 crore.
It is expected that this year the Centre’s share would be above Rs135,000 crore, and the states would get about Rs90,000 crore. “If this is time of crisis and the citizens are expected to share the burden, then the governments should also be prepared make a sacrifice,” said the official.
However petrol seems to be a cash cow and no government is willing to forego the revenues.
“The issue has been discussed at several meetings of the parliamentary standing committee. The idea of giving up ad valorem taxes and replacing them by a per litre flat rate has been discussed and rejected. Considering that the demand has no relationship with the prices, the governments feel elasticity of revenue should not be given,” a senior MP said.
The relief that customers would have got from a flat tax rate can be imagined. It would have been at least Rs8.50 per litre in this year alone. Experts feel it is just a matter of time before the ad valorem taxes are given up.
“If the oil marketing companies are to recover their full costs, the government has to at least forego the revenue buoyancy that comes with every price hike. It should be satisfied with increases that come from the growth in the sales,” the MP added.
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