Hardeep S Puri*
Since early-2020, governments around the world have been in the throes of the COVID-19 pandemic, struggling to adapt to an evolving world order which is not of their making. India has emerged among the most resilient countries – a reality that is reflected in the IMF's latest growth projections that India will be the fastest-growing major economy in the world at 8.2% in 2022-23, compared to the global rate of 3.6% for the calendar year 2022. India was able to turn the socio-economic difficulties posed by the pandemic into an opportunity thanks to the visionary initiatives of the Modi Government. Interventions such as the unprecedented Rs. 20-lakh-crore ‘Aatmanirbhar Bharat package’ have ensured that the nation plots a sustainable and inclusive economic recovery. The Indian Government continues to provide free ration to 80 crore Indian citizens; has administered 188 crore vaccines (at the time of writing); and has committed to investing Rs. 111 lakh crores in the National Infrastructure Pipeline (NIP) to re-ignite core sectors of the economy. That this was done despite the curtailed revenues and significant assistance provided to state governments speaks volumes of the Modi Government’s priorities. The government’s adherence to the ethos of responsible governance and cooperative federalism is reflected in the levels of financial support provided to state governments despite 500% increase in crude prices since the pandemic low and the volatility due to military actions in Ukraine. These factors put considerable burden on India as it imports almost 85% of its petroleum requirements.
Even as India is rapidly enhancing its renewable energy capabilities to offset foreign dependency, it must be recognised that more than 6 crore citizens purchase petroleum products at retail outlets every day. As the country’s economic growth gathers up pace and consumption continues to increase, per-capita demand for energy will be even higher in the medium-term until India transitions to a green economy. It is against this backdrop that one needs to consider whether governing entities are pulling in the same direction to ensure that the burden passed on to the Indian consumer is minimised. Modi Government has ensured that price rise in petrol during its stewardship has been minimum possible. Between April 2021 and April 2022, petrol price rise in India, at 16%, was the lowest among the USA (50.6%), Canada (50.7%), Germany (50%), UK (58.9%), and France (33%).
Similar differences in price rise are observed for diesel; India again has the lowest increase
among all major nations. Historical analysis of domestic price rise suggests that the price rise of petrol during 2014-2022 of 36% (Rs. 77/litre to Rs. 105/litre) is the lowest among comparable periods in the last 42 years: 60% during 2007-14 (Rs. 48 to Rs. 77); 70% during 2000-2007 (Rs. 28 to Rs. 48); 55% during 1993-2000 (Rs. 18 to Rs. 28); 125% during 1986-1993 (Rs. 8 to Rs. 18); 122% during 1979-1986 (Rs 3.6 to Rs. 8); and 140% during 1973-79 (Rs. 1.25 to Rs. 3). It is also important to remember that prices of petrol were deregulated in 2010 and of diesel in 2014, with the implication that they have since become market-driven. Despite the revenue
deficits induced by the pandemic, the Modi Government reduced excise duty by 5 rupees/litre on petrol and 10 rupees/litre on diesel in November 2021. Even as most state government followed suit to cut Value Added Tax (VAT), Congress-allied states such as Maharashtra, Tamil Nadu and Jharkhand continued to levy excessive excise duties. It is particularly amusing that the same Opposition which is protesting against the price rise chooses to levy the highest rates of VAT on fuel across India. The figures mentioned below should illuminate and make clear this disparity:
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Maharashtra 26% + Rs. 10.12 per litre
Rajasthan 31% + Rs. 1.5 per litre
Kerala 30% + Rs. 1 per litre
Andhra Pradesh 31% + Rs. 5 per litre
Telangana 35%
West Bengal 25% + Rs. 13 per litre
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As the Prime Minister pointed out in a recent meeting with the Group of Chief Ministers, many Opposition-governed states earn twice as much as some BJP-governed states through state- levied taxes on petrol. On other important petroleum inputs such as Aviation Turbine Fuel (ATF), Maharashtra and Delhi continue to levy up to 25% VAT on ATF whereas in Ahmedabad, in the BJP-governed Gujarat, the VAT is as low as 5%. This results in an inconvenient burden on air passengers to whom the mark-up is passed on, almost entirely, because ATF costs constitute upto 40% of airline operating costs. Ironically, many of these states wasted no time in slashing their taxes on alcohol and spirits. In November 2021, the Maharashtra Government slashed excise duty from 300% to 150% on imported liquor. In the same month, the Andhra Pradesh Government reduced VAT on liquor which was being levied at anywhere between 130% and 190% to between 35% and 60%. Earlier, in April 2021, the Rajasthan Government reduced additional excise duty from 34% to 31% on beer. The Opposition would do well to remember that it was under the UPA Government that the long-term oil bonds worth Rs. 1.44 lakh crores were issued between 2005-12. The Government of India is now saddled with a bill of Rs. 3.2 lakh crores for these UPA-era oil bonds. It was the UPA regime that stopped licensing acreage which caused the oil E&P to come to a grinding halt. After years of gigantic failures of their own which have caused damage to India’s energy security, it is incredibly rich of the Opposition to scream about price rise. What is even more
galling is that the Indian media, which should have called out the Opposition lies, has fallen for this demonstrably false and underhanded narrative. What one expects is a modicum of reciprocity in the collective mission of nation-building. The Government of India has supported state governments with both direct and indirect measures, including a higher share of 42% of tax revenues under the Finance Commission grants as well as enhanced Post Devolution Revenue Deficit Grants and higher share of GST collections. More than Rs. 1 lakh crore of interest-free loans to state governments have been earmarked under the recent Budget which would reduce state government borrowings through State Development loans (SDL). Furthermore, Ways and Means Advances (WMA) and Special Drawing Facility (SDF) borrowings can be availed at minimal rates by state governments. Pertinent to the issue at hand, state governments have collected Rs. 15.16 lakh crores as fuel
taxes over the past eight years. It is startling, then, to see that these state governments would show reluctance to do their bit to provide relief to consumers. On the one hand, the Congress-led Opposition is peddling false narratives on fuel prices, and on the other, they are refusing to reduce excise on petrol and diesel which would contribute in providing more relief to the consumers in their states. These actions are hypocritical and misguided. This government is conscious of the challenges in the oil and gas sector, and is taking informed decisions to build domestic capabilities. We continue to take a holistic view on the subject, and provide the citizens of India with clarity of vision, transparency of action, and welfare for all. The ever-increasing electoral mandate that the citizens of India repose on our shoulders reflects their faith in our actions.—The Hawk
*The writer is the Minister of Petroleum and Natural Gas; Housing and Urban Affairs, Government of India.