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September 11, 2011

Page: 5/42

Home > 2011 Issues > September 11, 2011

Politics of fuel price rise
Government makes huge profit by taxing the poor consumer

By SS Nair

PRICES of petrol and diesel were increased number of times within a year, that too often steeply. LPG prices were also increased though less often. According to newspaper reports, the central and some state governments claim that they have no role in the price hikes. This is one of the blatant examples of deceiving people.

In fact, Governments are heartlessly earning more and more revenue by taxation at the expense of aam admi. From the price of each litre sold, a shameless exorbitant profit (about 50 per cent in some states) is made. Since these hikes in taxation form a percentage of the price, the profit increases each time fuel prices are hiked. Thus, governments have not only a role in increasing prices but could have developed a vested interest in increasing fuel prices. Another basic defect of these taxes is that they burden both rich and poor alike, both directly and indirectly by the spiralling cost of everything including essential things needed by the poor. Lack of an ethics of care for aam admi is crystal clear on the part of governments which go on merrily making profits from sale of fuels while aam admi, have been forced repeatedly to increasingly struggle against inflation and badly hurting food inflation, that too continuously for a long time.

Central and state governments are conveniently closing their eyes to the fact that such taxes are increasingly burdening lower and middle class two wheeler users (whose number is about five times higher than four wheeler users) and large number of users of three wheelers (the vehicle for poor and middle class). On the other hand, rich car owners, corporate bodies and government departments are not seriously bothered and continue to waste and misuse petrol and diesel despite high prices. Sad to say, an attitude of hardened apathy continues to prevail while hypocritically giving lip sympathy to aam admi and bluffing that government have no role in fuel price hike, while making profits at their expense. They forget that they are servants of the people and continue to dictate like masters after creating conditions which make most people spinelss.

In an article in Deccan Chronicle, Bangalore (30-06-11), Prasenjit Bose has given detailed calculations of earnings of central and state governments from taxing fuels and concluded that earnings from petroleum sector is Rs 80,000 crore for central government and Rs.70,000 crore for state governments, which add up to Rs.1,50,000 crore. These huge amounts are extorted mostly from unwilling but helpless aam admi. According to an article in DNA, Bangalore (25-06-11), the Central Government has eliminated five per cent customs duty on import of crude oil. Government feels that it is being magnanimous. But this reduction of five per cent of their profit is mockingly miserly and callously forgoes a chance to help aam admi suffering from general and food inflation, after the strain of inequitable development. On the other hand, governments could have some justification if these huge funds were utilised wisely with a long term vision to speedily and adequately develop alternate energies such as solar and wind power as well as alternate biological fuels on a large scale on a war footing, instead of nibbling at these without any surge in emergency.

The reasons given for this heartless taxation are the need to control budget deficit and increase in international price of crude oil. The burden of subsidy is another justification.

For controlling budget deficit, there are better and more human ways of reducing deficit which have not received proper attention. Reducing enormous misuse and wastage of funds which occur in most departments has not received adequate attention. For example, it is well recognised that only about 15 per cent of huge funds for projects meant to help rural people reached intended beneficiaries, year after year. Yet nothing is done to stop the 85 per cent drain in public money. This is an example of many such landmarks for inefficiency, grave irregularities and corruption. Another important need is to postpone projects of low priority to better times. For example, sending Indians to the moon at the cost of increasing sufferings of aam admi ought to get low priority till the situation improves. Emoluments of elected representatives have been increased substantially even though an objective analysis would have shown their lack of attention to properly carrying out their legislative functions (often because of sacrificing national interests to party interests).While aam admi are made to suffer by drastically increasing fuel prices, budget for the often misused MP Local Area Development Scheme has been steeply increased from two crores to five crores for each MP. Many more examples of misuse, wastage and distorted priority can be found if only governments care to look for these to reduce budget deficit, with a sense of urgency for helping suffering people. Lack of ethics for care of aam admi and innovative thinking and action are all conspicuous by their absence. Sad to say, lack of political and administrative will to give time and attention to such desirable people-friendly actions is evident and regrettable.

Callousness has manifested itself even in allocation of work and monitoring. The more efficient political leaders and bureaucrats are entrusted only with “gainful” departments dealing with economic matters or power over people, for obvious reasons. Even worse, while these efficient persons eagerly apply their mind to multiply collection of funds, they hardly pay any attention to prevention of misuse and wastage of public money. They merrily continue to do so. Surprisingly, even the Public Accounts Committee of Parliament has not adequately questioned this serious inactivity leading to huge losses in public money continuing for many years.On the other hand, the least efficient and unwilling are tagged on to tackle social welfare sectors. Even worse, they are often more interested in manipulating for a change to “gainful” departments.

Increase in international price of crude oil, there are unanswered questions. An editorial in Deccan Chronicle, Bangalore (26-06-11) points out that we buy petrol at Rs 70 per litre as against approximately Rs 45 per litre by people in USA and asks whether we are paying more for crude oil even though we are closer to Saudi Arabia. It also asks whether there is a standard cost for conversion of crude into petroleum products. A white paper covering all aspects of buying petroleum products and fixing fuel prices is badly needed to clear all issues. The article by Prasenjit Bose also supports this urgent need for a white paper, while stating that even at the prevailing international price of crude oil, “the domestic price of oil would be less than Rs 30 per litre”. Hence, putting the blame on international price of oil is diversionary and not justified.

With regard to subsidy, Prasenjit Bose states as follows while comparing with Rs 1,50,000 crore revenue from fuel tax: “In contrast, total petroleum subsidy in 2010-11 was around Rs.38,000 crore (as per the Union Budget). This is to further come down to around Rs 23,000 crore this year. Clearly, the government is earning much more in taxes than spending on subsidies in this sector.” In all fairness, government should not tax to earn a profit at the expense of fuel users but restrict the tax to cover subsidy only. Or, allow oil companies to fix fuel price to include the subsidy. Either way, fuel prices will come down drastically and help the suffering people.

Apart from sheer callousness for the plight of aam admi, another possible reason may be that government probably feels that increase in price of petrol and diesel will check increase in their consumption. But this has not happened. The fact is that these fuels are a necessity for development and reasonably good quality of life. Neither are these luxury items for the bulk of people and those engaged in industry, transport, agriculture, health care, education and other development activities. Wastage and misuse are mostly confined to vehicles used by officials of government and corporate bodies and rich people who want to show off their wealth. Increases in prices have not been deterrents for such people. The Deccan Chronicle editorial (26-06-11) states “despite the government raising fuel prices there are no signs of a fall in offtake from the fuel pumps, which shows that there is enough money with certain class to ignore any hike.”

It is possible that the latest increase was timed to weaken the demands for a strong Lokpal bill. Besides serving as a distraction, organising protests will become more costly and reduce the number of aam admi who can afford to protest. If so, such cunning should be defeated by recognising that the two are connected. Increase in cost of living results in higher bribes also. Reluctance to introduce a strong Lokpal bill and reduce fuel prices are both instances of taking people for a ride for years together and should be fought together with renewed vigour.

DNA SUNDAY, Bangalore (26-06-11) stated that “This steep hike will pinch household budgets already pummelled by soaring prices of food items and essentials.” In addition, increase in prices also result in reduced accessibility to health care and education. Though governments must be aware of these, they have been ignoring these because of lack an ethics of care for the people. In 2005, Standing Committee on Energy of Parliament had urged government to reduce its reliance on petro-taxes. Ignoring this, revenue from petro-taxes were increased, showing scant respect for Parliament which is repeatedly stated as supreme (whenever it suits!). Collection of taxes on fuels should be stopped immediately to drastically reduce fuel prices to control both general and food inflation and thereby relieve burden on aam admi. This will enable them to eat well, maintain good health, educate their children better and use transports necessary for their daily use, besides achieving speedier development of the country.

Let us develop an ethics of care for the suffering millions and rethink and act with a sense of urgency to help them.

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