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Petrol – Diesel on Fire. Goverment may show mercy of lowering taxes.

Spiralling petrol prices touched fresh record levels in Delhi and Mumbai on Monday, at Rs 76.57 and Rs 84.40 per litre respectively.
How high is too high? When Indian citizens pay almost double the cost of US (in spite Rupee performing some historic lows of its own against dollar) one must question what is going on.

The answer is simple. Tax greed of Modi sarkar.

Modi had the good luck of finding itself in power just as the highest ever crude prices fell to some of the lowest in recent memory. The government decided not to pass the benefits to the consumer and increased taxes so that the customers – that included you and me continued to pay the same rate. While the crude swung down by over 65%, the Indian retail prices moved down less than 20%.

It was a wind fall gain. With almost all subsidies shut down or rationalised, government was already saving big on its expenses. It almost seemed that this would ensure a big war chest for the government to go after the structural problems in India. Almost everyone hoped to see a massive infrastructure blitz, massive defence spending – specially in the development of indigenous technology.

But that was not to be. The war chest was spend on the stupidity of demonetisation, followed by the break down of economy by the faulty GST roll out. While we genuinely believe GST will help India in long term, the start was a disaster. The government made a fiscal mess, destroying business and opportunities. High taxation on Petroleum remained one of the few life line that kept the public spending afloat.

For the record as per Business today ‘ the retail prices have gone up, the price at which the fuel is sold to petrol pump dealers has come down drastically since 2013. The price of petrol charged to dealers during FY2014 was Rs 47.18 per litre, way more than the current charge of Rs 37.19 for the same litre. The government’s effective tax rate on petrol in 2013 was at around 43 per cent and presently it is a little over 100 per cent.’ According to the finance ministry’s revenue collection estimates, the central government expects to collect more than Rs 2.579 lakh crore by levying taxes on the petroleum products by the end of this fiscal. This is a massive jump from the gross revenue collection of around Rs 88,600 crore in 2013/14, in the last fiscal the collection was Rs 2.016 lakh Crore.

Now that the crude prices are on rise again, Modi has some very tough choices to make. If Petroleum taxes are taken out of equation, GST collection may not be able to fund the election year populism. If he does not petrol-diesel prices themselves will be the demon that will kill BJP.

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