That the Wuhan virus (and Covid-19 caused by it) has impacted the global economy severely, is no longer a hidden truth. Its aftermath tolling effects are out in the open and are being witnessed across geographies. The economic crisis that entailed the lockdowns due to the pandemic has sent commodity prices at all times high globally.
One commodity that is the backbone of all human activity is petroleum and the rise in its prices came as almost the final knockout punch on the common man. It is true, however, that the soaring fuel prices is a global phenomenon and not limited to India. It is also true that the Covid-19 alone hasn’t buoyed the fuel prices.
A year and a half ago, when the crude oil global price hit a low of $19 per barrel, the OPEC (Organisation of Petroleum Exporting Countries) decided to cut oil production to boost the prices up. It’s simple demand and supply matrix. Owing to OPEC’s production cut decision and ease in Coronavirus related travel restrictions, the entire world is now facing a supply deficit as well as spurred demand which manifested, as OPEC desired, in October 2021, as Brent crude oil reached a 3 year high of over $85 a barrel. OPEC and its allies led by Russia has decided to gradually withdraw the supply cut only from 2022, eradicating any hope of immediate relief from inflation in fuel cost worldwide.
Unfortunately, however, each time the fuel prices rallied in India, Opposition led by Congress (INC) decried and held the Narendra Modi government responsible for it while deliberately choosing not to objectively access the dynamics that play a vital role in deciding petroleum products pricing, all the while seething over hefty VAT/ sales tax, which accounted for 41.67% of final petrol price, that Opposition ruled states too enjoyed levying over Petrol and Diesel.
When Opposition’s entire mourning over inflating petrol prices emanates from its compulsion to target the Modi government for factually no fault of its, it becomes necessary, before we plunge into the details of the hypocrisy of Congress-led opposition, to contemplate and unravel the mechanics of what goes behind the scheme of fuel pricing.
The pricing of domestic petroleum products such as Petrol and Diesel consists of essentially 3 components (the fourth component is the commission paid to dealers, but it is so small compared to the other three components that it is not material) I) base price II) Excise duty levied by Central Govt and III) VAT/ Sales tax levied by State Governments.
The base price is essentially the cost of production that Indian refineries incur and is proportional to global crude prices. The higher the global crude oil price gets, the higher will the base price be. The Centre excise taxation amounted roughly only 30% while VAT or sales tax levied by State governments amounts more than 40%. It is to be noted that the central government had only a 30% stake while 70% of it (30% base price+ State’s 40% VAT) was beyond its control.
The state governments, including non-BJP/ Opposition-ruled states, levied a whopping 10% more than the Centre/ Modi government. It is worthwhile to note that while Central excise duties are fixed, the VAT levied by States are ad-valorem. What this means is that taxes levied by States go up with the price buildup of fuel and so does States’ share in overall fuel price. Modi government on various occasions has accepted that rallying fuel price is a burden on the common man and appealed for a joint call of both Centre and States on tax cuts. If the Opposition was even one bit serious and concerned about the perils of the general populace due to the rise Modi government on various occasions has accepted that rallying fuel price is a burden on the common man and appealed for a joint call of both Centre and States on tax cuts.
If the Opposition was even one bit serious and concerned about the perils of the general populace due to the rise in fuel prices, it would have immediately reduced the tax that states ruled by them levied on petroleum. The opposition instead chose to engage in mere mudslinging on Modi Government.
However, given the sensible and decisive leader that Prime Minister Narendra Modi is, on 3 November, a day ahead of Diwali, he decided to slash the Central levies on petrol by ₹5 a litre and on diesel by ₹10 a litre, in an attempt to unilaterally provide a major relief to Indian people. All BJP ruled States and UTs immediately emulated the Centre by bringing substantial reductions in petrol and diesel by up to ₹13.5 and ₹20 per litre, respectively. Almost 10 days have passed and there has been no petrol tax cut in 9 non-BJP or Opposition-ruled states. These states are Andhra Pradesh, Chattisgarh, New Delhi, Jharkhand, Kerala, Maharashtra, Tamil Nadu, Telangana and West Bengal.
The saga of the Opposition’s hypocrisy doesn’t end here. Soon after fuel prices in all BJP-ruled States and UTs fell down below ₹90/₹100, Opposition leaders expressed their inability to cut VAT on fuel in states ruled by them due to the GST dues and compensation that they claim the Modi government hasn’t cleared to States ruled by them. Some Opposition leaders even accused the Modi government of using fuel prices as a political tool. Mamta Banerjee, TMC Leader and Bengal CM claimed ₹45000 crores in GST compensation. Sharad Pawar used the same line too.
It is no secret that Congress and its allies in the opposition have the clinical habit of lying upfront when it suits them politically. But should their convenient lies become an inconvenience for the common people? The truth is there is no connection between GST compensation and States’ ability to cut VAT on fuel. If that was indeed the case, how could BJP ruled States and UTs lower their VAT?
The Central government has always been prompt in releasing GST compensation to States. During the pandemic, it has gone several steps beyond this. Realising that the pandemic was having a short-term impact on GST and Compensation cess collections, the Centre, in order to ensure that States don’t suffer, set up a back-to-back borrowing system so that States were compensated adequately and on time. For the 2020-21 GST compensation, the Centre committed to compensating for the entire ₹ 2.35 lakh crore of losses that the States bore during the pandemic in the GST council.
It is to be noted that in the GST council meet when States were given two options on how they would like to be compensated, all the States opted for the same option wherein the Rs 1.1 lakh crore loss attributable to GST implementation would be compensated that year itself and the balance would be compensated by extending the GST compensation cess over the five years it was meant to be in effect. Out of which, ₹1.1 lakh crore has already been compensated, and the GST Council has agreed to extend the GST Compensation Cess past 2022 (when it was originally meant to be removed).
Moreover, in order to provide State Governments with the fiscal flexibility to ensure a strong economic recovery from the pandemic in their regions, the Centre front-loaded its releases of compensation in 2021-22. In just 3 trenches, the Central government released the entire year’s compensation amount of ₹1.59 lakh crore to States within the first 7 months of the financial year itself. Therefore, to argue that there is still some pending GST compensation that is due is a factually incorrect argument as it was agreed by the GST Council that the pending amount would be due only after the completion of the first five years of GST, which is not over yet.
The opposition led by Congress has time and again used the common man as a pawn and their perils as merely an opportunity to settle political goals. It is a tragedy that the opposition used a global tragedy as a political instrument to frame the Modi government. Now that the ball is in their court, the Opposition is still to practice what they’ve been preaching to Modi.
The MVA government in Maharashtra has slashed excise duty on imported liquor by 50% but hasn’t cut VAT on petrol and diesel products. The Opposition’s priorities are clear. In Maharashtra, the rich can now have their scotch cheaper whereas the common man, the poor, continue to suffer and bear the brunt of high fuel prices. It won’t be an exaggeration to say that they weep crocodile tears for the poor and disadvantaged, but are basically happy with things as they are. It is our duty and obligation to expose the Opposition‘s deceiving lies, propaganda and treachery tirelessly.
