No Respite for the Consumer
- Crude oil price fell about 80 percent in the last year, from $100/bbl to $30/bbl currently.
- But there’s been little or no difference in the pump-price of petrol or diesel.
- As crude prices collapsed steadily, the government resorted to a series of hikes in excise duty on fuel.
- The excise revenue from petrol up 23 percent from January 2015; 69 percent for diesel.
- Credit Suisse report shows the govt expects Rs 84,000 crore in revenue from higher excise duties on petrol and diesel in 2015-16.
Do you feel a tad irritated, or even aggrieved, every time you drive into a fuel pump and pay your bill? Well, you should.
Because over the last year or so, the government in New Delhi is squeezing your finances dry and filling its coffers with an unexpected bonanza: a steep fall in global crude oil prices.
That fall – around 80 percent from the $100-plus per barrel rates that crude commanded till about a year ago – has hurt nations that sell oil globally. These include most members of the OPEC oil producers’ cartel, headed by Saudi Arabia, as well as energy-rich countries like Russia.
India has little oil or gas of its own: we import more than three quarters of the oil we consume. A fall in global prices should make us all – government and taxpayers – happy. Instead, only the government is smiling. Why?
The answer, if you’ve filled a tank recently, is apparent. There’s little or no difference in the pump-price of petrol or diesel from levels that prevailed when global crude was trading at $100-plus per barrel, to now, when it’s under $30. As a rational fellow, you’d wonder why that is so.
It gets worse when you remember that American motorists are now paying roughly as much for a litre of petrol as they pay for a litre of bottled water. If that were true here, you’d be paying Rs 12 or so for every litre of fuel, instead of five times that much.
That’s because the government has sucked out all the gains from falling oil prices that you could have made, by taxing them away. Most people – regular folk like us – don’t bother to keep tabs about exactly how the government soaks us through taxes.
Luckily the clever chaps at Credit Suisse (CS), one of the world’s largest money managers, are going about their work. They’ve calculated exactly how much more money New Delhi has made from taxing petrol and diesel, ever since prices started falling.
On 2 February, CS’ Asian Daily published the results of its labours. Of course, the bulk of the report was about the government’s overall finances, perhaps to protect its readers from the shock of what was tucked away somewhere near the end of the document.
This mentioned that New Delhi expects to make an additional Rs 84,000 crore in revenue, simply from charging higher excise duties on petrol and diesel in 2015-16, the fiscal year that will end on 31 March this year. Now that’s a very large number.
There is no way anyone can avoid paying excise duty, which is charged at the gate of oil refineries, for every litre of petrol or diesel that comes out of it for sale in India’s gas stations.
CS pointed out that over the last year, as crude oil prices collapsed steadily, the government resorted to a series of hikes in excise duty on fuels. In fact, it points out, there were five successive increases of this tax in the period.
As a result of these hikes, the excise revenue from petrol has risen by 23 percent from January 2015. That on diesel is up a staggering 69 percent in the same time.
This is what explains why you, dear reader, continue to shell out high fuel prices, even as state-owned oil companies like IOC and private ones like Reliance or Essar, pay around a fifth of what they were earlier paying for crude oil.
Is this blatant squeeze-the-consumer strategy going to end sometime soon? Analysts at CS think it’s unlikely. They reckon that if the government continues its high-tax policy on fuel, it could boost revenues by an additional Rs 63,000 crore in the next fiscal.
Someone clever once quipped that there were only two constants in life: death and taxes. Remember that aphorism, for that is the only palliative when the government decides to pick your pocket through sky high fuel taxes.
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