March.04 : The hike in Central excise duty on petrol and diesel and the two per cent ad valorem increase on non-petro products in the Budget has taken a swipe at the feelgood feeling sought to be projected by finance minister Pranab Mukherjee last Friday. While the government has its compulsions in trying to shore up revenue and bridge the burgeoning fiscal deficit gap, it could have tapped other avenues, particularly the rich, who have got away scot-free
They are the ones who pay up to Rs l.5 lakh for a bottle of fine wine and over Rs 1 lakh for a handbag, not to mention lakhs of rupees on a watch, a suit, or a sari. The luxury industry in India is estimated at $3.5 billion, and foreign luxury and super-luxury brands are entering this country in droves because they have realised that there is money here. If they know enough to be able to cash in on this, how is it that the government cannot think innovatively on how to tap such huge sums in surplus money to fund its welfare programmes? The widespread protests seen across the country over the rise in petrol and diesel prices is understandable because it is certain to have a vicious effect on the salaried class, and even worse on the poor. The cascading effect means that every manufacturer, middleman or retailer who is impacted by the rise in fuel costs will take his pound of flesh from the consumer. The tax on petrol came as an unpleasant surprise. The Kirit Parikh Committee had recommended an increase in petrol prices in order to bridge under-recoveries, an euphemism for losses that the oil marketing companies suffer because they cannot pass on the rise in crude prices internationally to the Indian consumer. Today the oil companies suffer a loss of Rs 3.90 per litre of petrol, Re 1.65 per litre of diesel, Rs 17.20 on kerosene and Rs 271 per LPG cylinder. The government has been putting off implementing the recommendations of the Parikh Committee because inflation is already running high. The double-digit food inflation is particularly burdensome on the people, particularly the aam aadmi, senior citizens and pensioners. One cannot forget the overburdened farmer who uses diesel pumps and who does not have the benefit of a dearness allowance enjoyed by an employee in the organised sector. For this reason, the government put the Parikh Committee’s recommendations on the backburner. It therefore defies logic as to why it hiked petrol prices, which translates into an increase of Rs 2.50-3 per litre in cities like Mumbai. The revenue from this goes directly into the government’s kitty, and not to the petroleum companies.
The partial rollback in reduction of excise duties that the government had given as part of the stimulus package is also misleading. When the government announced the stimulus a year ago there was hardly any inflation, but now, with double-digit inflation, this rollback will take a heavier toll. It is disconcerting to hear rich Indians parroting the government’s logic that since the finance minister has put Rs 50,000 back into the pockets of the taxpayers, he/she will not feel the petrol hike pinch. This betrays a gap the size of a black hole in understanding the DNA of our billion-plus population. How many people pay income-tax? And how many of them are in the Rs 8 lakh annual income bracket? In most advanced capitalist countries governments have a safety net for the poor and unemployed, but there is no such thing in India. There is also no national health programme, as there is in the West, which provides a safety net for those who become victims of the free market system.