The Hindu Business Line : No postponing hard decisions

After delay and dithering, the UPA Government at long last cast the die when it declared an increase of Rs 2 per litre for petrol and Re 1 per litre for diesel in the retail sale of these products, sparing cooking gas and kerosene. But the press statement issued by the Ministry of Petroleum and Natural Gas recalled in a mollifying tone its earlier reductions in the retail prices of petrol and diesel by Rs 4 per litre and Rs 2 per litre in two consecutive reductions of Rs 2 per litre and one rupee per litre, respectively, in November 2006 and February 2007.

But the global crude prices went on wild gyrations, breaching $100 per barrel in the subsequent period and are now hovering roughly at $90 per barrel. When action was needed at the height of the price flare-up in the past several months, the Government simply dilly-dallied, lest its move should provoke the ire of supporting allies from outside - the Left Parties - and the principal Opposition BJP party.

CHARGE AGAINST GOVERNMENT

Now that the decision has been made, the Left and the BJP have charged the government with needlessly tinkering with prices of petroleum products, taxes on which are now well above 50 per cent, the highest in the world. Both said the government had rejected their plea for restructuring the ad valorem tax on import of petroleum products. But the compulsions of the exchequer on duty cuts are too great.

With the general import duty coming down in the process of globalisation and to help domestic manufacturing, the Finance Ministry has its own defence in not succumbing to pressure on duty cuts, wherever feasible. The Government's avowed aim of promoting inclusive growth would be the first casualty if the fiscal space for tax receipts is narrowed by demands from every segment to cut down tax rates.

OIL CESS

In fact, the upstream oil companies have been subject to a cess that is credited into the oil industry development fund, now running into crores of rupees. Though this fund is ostensibly meant to provide for the development activities of the oil industry, it has seldom been used, as the exchequer has been availing of it in the general Budget.

Committee after Committee in Parliament has questioned this practice but the upstream oil companies continue to pay the cess.

No doubt, the aspirations of Indians have escalated and their means of gaining income have also multiplied. The authorities should widen the tax base instead of getting swayed by pleas for reduction of essential taxes on rich industries such as oil and minerals.

Where price revision is inevitable in view of the global spurt in crude prices, there is no point in postponing hard decisions in the name of placating one section or the other when the administrative pricing mechanism was dismantled a couple of years ago!