Better late than never

Better late than never

Modi government does well to cut tax on fuel, state governments should follow suit.

Fuel prices have been racing north in the world, with forecasts putting Brent crude at $100 a barrel in the coming months. In India high fuel taxes have worsened the economic pain brought on by domestic and global factors. Just the central excise revenue from petrol and diesel has more than doubled over the last three years. States have tended to tax even more zealously. Net result is filling up the tank has become nightmarish, with petrol crossing Rs 90 a litre in Mumbai and diesel nearing Rs 80 in Chennai. So it is welcome relief that the Centre yesterday cut petrol and diesel prices by Rs 2.5 per litre, with oil marketing companies to absorb Re 1 and excise duty cut by Rs 1.5.

Poor economic sentiments have also led to a market bloodbath, with Sensex dropping more than 800 points just yesterday. Thus, both business and consumers can do with something to lift their spirits. This is what has been dished out by the fuel price cut, which shall go directly into citizens’ pockets. With the Centre suggesting that state governments match the Centre’s price cut – and Maharashtra, Gujarat, UP, MP, Chhattisgarh, Tripura, Assam, Jharkhand, Rajasthan complying fast – the total lowering of fuel prices by Rs 5 would be a significant boost for broad-spectrum economic activity.

Finance minister ArunJaitley said that the excise duty cut would impact central revenue by Rs 10,500 crore. However, we can look at the equation in a different way as consumers wouldn’t just put the money in their pockets but spend it, fuelling a healthier commercial cycle and ultimately more revenues to the government. Now more states need to do their part and lower their fuel taxes. Their windfall profiteering from high global oil prices even as ordinary people suffer has looked ghoulish.