The Telegraph
Since 1st March, 1999
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Petrol, the govt’s pickpocket

New Delhi, March 6: The Centre has confirmed what you have always suspected.

Indians pay more for petrol than most others in the world — and the principal price-driver is tax that is among the highest on the planet.

Prakash Karat, the relentless champion of fuel price cuts, may not like it but Americans pay the lowest prices for both petrol and diesel on a list furnished by the government.

If champions of the free world are preening, better pause and ponder. In military-ruled Pakistan, fuel taxes as well as prices are lower than those in India. So is the case with wannabe-superpower India’s smaller neighbour Bangladesh.

The figures, certain to rub salt into the wounds of inflation-hit consumers, were revealed in a little-noticed written answer in the Rajya Sabha today.

The data disclosed that even after the excise duty cut announced in the budget, various levies account for as much as 52 per cent of the petrol price in India. In the case of diesel, the taxes account for 32 per cent of the price.

Not that diesel prices and taxes are too low in India, though political protection has been given to what many consider a “poor man’s fuel”. The tax rates suggest the US treats the two fuels on a par for taxation.

The two countries that do charge higher petrol prices than India are South Korea and Japan. But both do not have any crude oil of their own — unlike India which sources over 25 per cent of its fuel needs from within the country.

The comparative tax component in the prices of petrol and diesel was made public by minister of state for petroleum Dinsha Patel in response to a question raised by Rajya Sabha member M.V. Mysura Reddy. It is not known why Reddy asked the question or what he plans to do with the data.

But the doctor-turned-MP of the Telugu Desam Party has managed to make the government admit that Indians are being milked harsher than the citizens of most other countries in the name of fuel prices.

Once an MP submits a question in writing, an answer has to be given — a rule that has helped put a specific figure to the perception so far that Indians are being forced to fork out steep fuel prices.

A senior finance ministry official sought to justify the high tax rate by citing “low direct tax collection” and “high evasion” in India.

“Direct tax collections, which include income-tax and corporate tax, are low in India compared to the advanced countries. The government, therefore, has to increase its revenue base by taking recourse to higher indirect tax collections,” the official said.

He added that “there is less tax evasion in countries like the US and, hence, direct taxes form a much higher percentage of their revenue collections. In India, a very small percentage of people pay taxes.”

The official had a ready explanation for the low rates in Pakistan, too. “As far as Pakistan is concerned, it is an economy that is thriving on US aid and the government can do with low resource mobilisation.”

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