By : Satyaki Paul
The crude oil prices are on the incline after the negative costs of barrel in the last year due to COVID19 pandemic. The Brent crude is currently at $71 from $52 due to economic recoveries of countries across the world as well as due to cuts made by OPEC countries, Russia, etc. These international fuel prices fluctuate frequently. In this context, Saudi Arabia announced an additional voluntary production cut of 1 million barrels per day between February and April of which only 250,000 barrels of production has been restored in May and 750,000 barrels of production is set to be reinstated over June and July. Beside the reversal of the voluntary cut by Saudi Arabia, OPEC+ is set to restore production of 350,000 barrels per day in June and 441,000 barrels per day July. Thus, numerous economics experts have noted that the with gradual withdrawal of cuts it is unlikely to have any significant impact on prices, as demand for petroleum products increases as demand increases prompted by increasing economic activity.
In Indian context, the increasing crude oil prices have contributed to petrol and diesel prices rising to record high levels across the country. The price of petrol has been hiked by Rs. 10.8 per litre since the beginning of the year while the price of diesel has been hiked by Rs. 11.5 per litre in the same time period. These increase in prices indirectly inflates the cost of primary and secondary products which in turn affects the income and expenditure of common man.
However, even if the international prices are low the government never passes on these benefits to the end consumers. Rather they brush up their fiscal deficit through these earnings. Thus, these retail prices can only be stabilised if the Government of India can successfully bring petroleum and allied products under the ambit of GST or some similar criteria of taxation.
In 2019-20, the Government of India had earned around Rs. 4.24 trillion by taxing petroleum and allied products. The price break-up for petrol and diesel includes: price to dealers, excise duty, dealer’s commission, and value added tax. The half of the retail price of petrol and diesel are covered through taxations imposed by centre (Excise duty) and states (VAT). Hence, if we calculate the value the total tax on petrol works out to around 160.82% (as per March 21, 2021 petrol and diesel prices in New Delhi). If we look into GST there are four slabs: 5%, 12%, 18% and 28% which is much less compared to what is taxed on petroleum products. Thus, if the petroleum products are brought under the GST then the governments wont earn a fraction of taxes that they are currently earning. There are also other ways through which the government can alternatively find other taxes from alcohol, real estate or income tax. However, only time can tell that if we can recover from our own trap of ever-greening the taxes on petroleum products. The author works as a Ph.D. Research Scholar at the Department of Anthropology, University of Calcutta, and the co-author of the book Anthropology For All (2021).