The very question as to how the above countries can afford to sell petrol at such low prices provides us with answer that the government of India is levying unjustifiably heavy taxes on petroleum products, even when the crude prices were lowered by the OPEC.
The Union Minister put the blame on uncertain political conditions in oil exploring countries and the global market for the oil price rise.
The revenues so raised would be paid to fuel retailers, allowing them to absorb spikes beyond the threshold levels, they said. The government needs to provide relief to consumers, complaining not only of higher crude prices but also significantly higher taxes. Additionally, states too would be asked to cut sales tax or VAT to show a visible impact on retail prices.
The government derives this idea from the basic principle that if upstream oil companies like ONGC and Oil India gain from hike in crude prices, then it is they who should pay the cess for the inconvenience caused by this hike. Upstream oil companies can not bear more given the burden of a 20% cess on crude, while reduction in duty will hit the exchequer. "The Union Minister is making such statements only to shrug off his responsibility", said Behera.
Prices of diesel and petrol in India have surged to a record high.
However, finance ministry officials contended that "from an economist's standpoint, a windfall tax is seen as non-distortionary and pro-poor". "We have to cut-off our expenditure on other goods for petrol and diesel". If Odisha government cuts its Value-Added Tax, the fuel price will come down.
Since the time the hiatus ended on 14 May, rates have gone up by Rs2.84 a litre in case of petrol and Rs2.60 in diesel.
The Union Minister said the Centre had cut excise duty on fuel by Rs 2 in October past year.
Though Pradhan's proposal is not wrong but the State would have to lose a huge amount in terms of revenue collected as State taxes on each liter of petrol and diesel sold, if it reduces VAT.