Petrol and Diesel Pricing

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Petrol and Diesel Pricing

In India, we pay so much for petrol and diesel due to tax and levies. Apart from the argument to contain fiscal deficit, the government has other reasons to not lower down these levies on this public utility.

Fascinating statistics –

For every additional rupee in tax and levies, the government gets Rs 130 billion more revenue while for every $10 per barrel increase in crude oil prices, GDP growth is reduced by almost 0.2-0.3 percent.

Why the people must pay high taxes?

Those who use vehicles must pay high taxes so that –

  1. It acts as a disincentive to restrict the use of petroleum products to control pollution as well as imports of such products.
  2. It acts as a source of revenue for other beneficial public use such as infrastructural development which has ripple effects on development.

Why taxes must be lowered?

The benefits of lower taxes and prices must be passed on to the consumers –

  1. To restrict inflation by keeping input costs low, that is important in terms of lower financing, input and transportation costs for the economy.
  2. To boost consumer demand, and ultimately benefiting economic growth.

Other similar questions –

Should we impose high taxes on petroleum products in the absence of good public transport alternatives?

What can be done?

  • The argument of government to not reduce tax and levies on the petroleum product seems justified but there are other alternatives to bring down the prices of the commodity. We can explore bringing down the input cost of petroleum products to increase revenue collections from higher growth in the commodity.
  • Similarly, a considerable focus on renewable alternatives must be given to fuels such as cellulosic ethanol for transportation, electric batteries for vehicles, solar power generation and pumped storage power wherever possible.
  • Rational pricing of inputs by reducing taxes on inputs could act as a desirable beginning which can be acted upon immediately.

SourceBusiness Standard

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