We all know how the gasoline prices are seemingly playing on a seesaw – going up and down as and when the prices in international oil markets swing due to reasons that are many. A certain thing, however, is constant, and that is the taxes that governments at the Centre and in the states recover on sales of gasoline products. Looking like not one but several pounds of flesh, these taxes grabbed by the state raises the sale price per litre of oils that move the wheels of commerce and industries as also those of the urban life. General public has no alternative but to lump this kind of extortion and carry on regardless with its normal life.
A recent report in a vernacular newspaper screamed how diesel prices differ from each other in the national and state capitals. It said that the difference between the two makes the consumer in Bhopal pay Rs. 7 more per litre than what their counterparts pay in the national capital. It has been contended that diesel is costliest per litre in Madhya Pradesh than anywhere else in the country. A major oil company of the country has brought it to the notice of the state government that the high price of diesel in the state has been causing fall in sales in the state whereas the sales in neighbouring states have registered a rise. The transporters who run their vehicles on diesel from north to south and from east to west are reported to be avoiding buying the fuel in Madhya Pradesh. No wonder, the sales of diesel have gone down to the detriment of suppliers. Obviously, the state by levying high rates of taxes on the fuel is pricing itself out of the market.
The basic cost of diesel after refining is Rs. 27.46 per litre. Hereafter the taxes take over. From Additional Excise Duty, to dealers’ commission to VAT and Additional VAT levied variously by the states the price per litre escalates at every stage for the consumer so much so that the taxes, taken together, amount to more than the basic cost of the fuel. Our state currently charges 31% as additional VAT on diesel taking its price way above what is prevalent in other states, especially those that are in the neighbouhood. Unsurprisingly, therefore oil marketing companies have registered a fall in sales and are a pretty worried lot so much so that they have brought this fact to the notice of the state government.
Gasoline is taxed, sometimes heavily, for various reasons. In India it could be for taking care of roads or for restricting its extravagant use to prevent uncontrolled outflow of foreign exchange for buying it in international markets. India hardly produces 20% of what is consumed in the country. Its prices may also be hiked by levying taxes for environmental reasons, i.e. to control emissions to prevent avoidable escalation of global temperatures. This, of course, would be a central act so that taxes are uniformly levied throughout the country. Taxes levied for environmental reasons would not normally be expected in an individual state as that would hardly make any difference to the environment. In any case, Madhya Pradesh government does not seem to have levied 31% additional VAT for this reason as there is no let up in the use by private parties or by the government of diesel guzzling vehicles. Most of the ministers and MLAs use only heavy SUVs that generally consume diesel and there is no indication of any step to curb its use. Besides, the high rate of taxation does not seem to be meant for improvement of roads either as roads in urban or rural areas have shown no improvement for years.
In heavily taxing diesel the state government has neither displayed any inclination for helping the commuting public by taking care of the roads, nor for the imperatives of the state’s and national environment. It has so far shown, on the other hand, scant regard for the environmental norms in matters dealing with forests, water bodies and atmospheric pollution. The only reason for levying such a hefty tax on diesel and petrol that suggests itself is that these fuels are considered cash cows. The taxes are levied for its own purposes by the government for financing several populist measures that it has taken in the social sector of the state’s economy. After all, the government has to fight another election and like any other political outfit it wants to come back to power. Nothing ensures higher incidence of favourable voting at the hustings than measures that are populist and are supposedly meant to uplift the economically weaker sections of the society.
Levying taxes for generating funds for expenditure on improvement of lives per se cannot be held against the government as it would seem to be a step to help the poor. But despite the hefty levies on transport fuels and alcohol, another cash cow, the lot of the poverty stricken masses has not improved. A report of 2015 said that the highest numbers of malnourished under-5 children are in Madhya Pradesh with 74% suffering from anemia and 60% from malnutrition. Infant and maternal mortality rates are also high, in case of the latter it is higher than Jharkhand and Odisha, though, of late, these have shown a decline.
There is, however, a flip side to it. Diesel is basically a fuel largely used in passenger transport and transportation of essential commodities. Hiking the price of diesel by levy of taxes has, therefore, a cascading effect adversely impacting the prices of essential commodities needed by even by the poor. The elevated costs make life difficult for them and could even drive a large section of them below the poverty line adversely impacting the social sector indicators.
A balance is, therefore, necessary to ensure that the high price of diesel does not hit the poor where it hurts. Perhaps, highlighting the stark difference in prices of diesel between Delhi and Madhya Pradesh had behind it this very suggestion. Since other states seem to have kept the diesel prices within reasonable limits none of them figures in the report. Having, apparently, failed to strike that balance, the state would seem to need to do just that to make life a little easier all around.