Fuelling anger

BY introducing daily price revision on June 16, the Modi government has moved oil away from headlines. Now that the diesel and petrol prices have touched a three-year high, the issue is back in news. So is the demand to cut taxes on oil. Dharmendra Pradhan, Petroleum and Natural Gas Minister, has tossed the issue of tax cut over to the Finance Ministry and ruled out any intervention in the government companies daily fixing oil prices. India’s stiff taxes on oil hurt the diesel-run economy and among the sufferers are farmers. Minimum support prices for farm products have not kept pace with the rise in input costs. Oil price decontrol, announced with fanfare as a reform, has made little sense as prices are kept high with levies. 

The benefit of oil meltdown since 2014 has been denied to consumers. The obvious beneficiaries have been the Centre, the states and the oil marketing companies, whose profits have shot up and so have dividends to the government. Fuel subsidy has fallen 86% in the past three years. There has been a 112% rise in Central and state taxes on petrol since 2014 and the corresponding increase for diesel is 300%. The only rational justification for higher oil taxes can be that these discourage consumption, given the dangerous levels of air pollution and clogging of roads by personal vehicles in big cities. The BJP makes tall claims about its government’s achievements; however, environment protection is not among these. Also, public transport development is not a BJP priority, either at the Centre or in states. 

Public welfare is the second excuse for extracting oil and other taxes. A culture of freebies, promoted by J Jayalalithaa and Parkash Singh Badal, is now imitated by every state leader desperately trying to work out the economics of a loan waiver. It is not easy to separate politics of poll bribes from development efforts or a genuine affirmative action. Tax money increasingly goes into populism, rather than welfare. This is a throwback to the 1980s and does not exactly promise vikas or economic reform.