” Political Necessities Can Turn Out to be Political Mistakes ” – June 11, 2020.

          Dr C Rajagopalachari, ( Statesman,  last Governor General of India, and Former CM of Chennai ) , while advocating how ‘Taxation’ should be approached had this to say : ” It should be like the bees (beetle) sucking honey from the flowers “,  implying that it should neither destroy the flower nor prevent the bee from getting the honey it desires. Taxation should be such that it achieves the twin benefits of securing resources for the Government and erasing the profound damaging effect in the lives of people. That the country does not have leaders of Rajaji’s ilk is the plight of our people now.

           Petrol with a basic price of Rs 18/-  is now being sold at  Rs 75.77  in Bangalore. Diesel with a basic price of  Rs 16. 50  is being sold at Rs 68.66 in Bangalore. Excise duty, State Tax, and transportation expenses, and others on these constitute 75%.  Central and State taxes alone comes to Rs 50/- on petrol and diesel. Subsidy on petrol was withdrawn in June 2010 and that on diesel in October 2014. It led to the decision of deciding the petrol and diesel prices every day based on international crude prices. A decision that needs to be welcomed.

          The argument that everyday tax revenue for the Government need not be wasted due to subsidy can be maintained and defended against attacks and opposition.

          In the beginning the above decision was exercised bimonthly. Later it became the practice to fix the price daily. It is from here that the Government’s unfair practices began.

          Fixing of oil prices helped distract people’s attention to inflation and rise in prices of the products they needed. One way it can be looked at is that the Government is acting in a dishonest way to gain an advantage. When the crude oil prices in international markets increase, petrol and diesel prices will also increase immediately. However, a decrease in crude prices did not simultaneously result in a decrease in petrol and diesel prices. 

          When prices increased, it was always in terms of rupees, and when prices decreased it was in paise only. This resulted in tremendous benefit to the government due to continuing high prices  in times of crude prices decrease. It started happening during the time of UPA.

          When PM Modi took charge in 2014, the excise duty of petrol was Rs 9.48  and for diesel it was Rs 3.56. Today the combined Central and State taxes come to Rs 49.42 for petrol and Rs 48.09 for diesel !

          On March 9, 2020, crude prices internationally saw a deep decline from $ 52/- to $ 31. It was unprecedented and not witnessed earlier since 1991. The corresponding decreases in prices of petrol and diesel should at least have been Rs 10/-.  On the contrary taxes have raised and revenue from that has been used for meeting the shortages of govetnment revenues.

          In April, the crude prices in international markets declined by $ 15, ( price stood at $ 16 ) but the government failed to share the revenues for the benefit of people. Now the trend is an uptick in crude prices. The daily price fixing procedure that has been stopped due to the lockdown (now in its 82nd day) will resume after the interruption. Past four days have witnessed the petrol and diesel prices being increased regularly.

          Government raises the tax on petrol and diesel to meet the shortage in its revenues generally. Oil companies want to use the increase to meet their losses. But the burden falls on people who suffer either loss of jobs or reduction in income;  or directly through job freezing/lock up initially. When compared with the crude prices of the month of January, a $ 23 decrease in crude prices still exist.

          Everybody will accept the proposition that the Government should be fair and transparent. Actions should reflect the integrity and honesty fully. But, the prevailing general feeling is one that sees the opposite causing not just harm but great injustice to the people.

           Prices rising alarmingly ;  general feeling remaining negative ;  difficulties facing people causing fear and worry –  the end result will certainly not be a gain but a loss to the administrators.

          For the economy to return strong or for the economy to bounce back, production expenses should fall or public savings should rise. For this to happen there must be a fall in petrol and diesel prices.

          Government should probably hold an inflexible determination not to enlarge the income beyond the real necessities of the government.

          THIS CAN BE THE BEGINNING OF A NEW ERA OF OUR GOVERNMENT.

 

   ” Dieu avec nous”

   Thursday, June 11, 2020 –  10.29 a.m. (IST)

   Tidbit : ” Our necessities never equal our wants ” –  Benjamin Franklin.

 

 

 

 

 

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