Anguish at Petrol Prices

Petrol prices again got hiked by Rs 1.82. This is the 13th time that it has been hiked since June of 2010.

The big difference this time around is that crude oil prices have actually been going down in the global market. When petrol prices were hiked in 2008 / 2009, the blame was placed on the crude oil prices going up and hence the cost is being passed on to the consumer. I can kind of understand that.

But, today, the prices are going up - not because the "cost" of petrol is going up. But, because the layer of tax above and beyond the cost has gone up.

The economics gets interesting here. My friend Garima Mishra helped me with these values: The price of petrol (say, Rs 71) can be split into 3 components:

1. The actual cost of petrol (including transportation, dealer commissions etc): Rs 40

2. Taxes - central government - Approx. Rs 15.00

3. Taxes - State government - Approx. Rs 14.50

So, let us get this straight. The tax on petrol is 75%. This is a tax paid by each person who buys petrol irrespective of whether he owns a moped or owns a luxury car. This moped owner's earning might even be lesser than the lowest tax slab. He is also made to pay a tax at the rate of 75%. Let us put this 75% in perspective. Luxury items like a Lamborghini Aventador attract a luxury tax of 100%. So, essentially the government is suggesting that petrol is a luxurious good. I see.

Another issue is that political parties react as if it entirely is a central government issue. Before an opposition party takes up cudgels against the central government, could they please address the tax component of the state government at least in the states where they rule?

I can absolutely understand if a cost escalation in international crude oil prices get translated to fluctuations in the price of petrol that consumers have to pay for. I can absolutely understand in the spirit of a free market. But no, this is not a case of cost escalation. The government says that it needs more revenues. Search for the cash cow. It happens to be the tax earned on petrol. Aha - milk it to death.

I have not been great in politics. I am not sure if changing the central government is an answer to this question. But, personally, I would be willing to vote for any party which assures me that the price of petrol will be equal to cost of petrol in international markets + a reasonable indirect tax rate (say, 10% or even 20%).

My earliest remembrance is paying Rs 20/- per liter of petrol (I was probably 10 then). There were days when I used to pay Rs 30/- per liter of petrol when I was "moped pooling" with Sankar. I would like the 30 year old in 2030 remembering that the price of petrol was Rs 50/- per liter when he was a 15 year old. Is that too much to ask for?