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Journalism of Courage
Going by all the talk in the finance ministry and its alter-ego across the road, the Prime Minister8217;s Office, it8217;s almost certain that we8217;re going to have a one to two rupee cess on diesel, and probably petrol as well, in the forthcoming budget. The argument being given for this, is the usual one: we need to develop roadways, and this money will be used to fund this. A largish component of the funding for what is now called the Prime Minister8217;s Rs 1,25,000 crore cross-country highway is, in fact, to come from this cess.
Since the roads will eventually benefit those who travel on it, according to this argument, it makes sense to get car and truck drivers to pay for the construction. Another argument given in favour of this is that since prices of commodities such as diesel are, in any case, very low, the consumer won8217;t really mind too much if he8217;s asked to pay a little more 8212; diesel prices in the country, in fact, have been falling for the last one year.
Last year, Rs 790 crore was to be generated from the cess on petrol, and was to be given to the National Highways Authority of India NHAI. None of this money has been given to NHAI so far, because the ministry of Finance has been arguing that it doesn8217;t make sense to let the money just lie idle with NHAI till it actually has some projects on which work is going on and for which the money is needed. Give the project details to us, we8217;ll examine its viability like we do for all others, argues the ministry, and we8217;ll try to release some funds. The finance ministry8217;s logic, correctly, is that if they allow dedicated cesses,and relinquish all control over them, then how can they have any control over expenditure? You may as well have a computer cess to fund the Information Technology task forces8217; grandiose plans, a contraceptive cess for the Ministry of Health and Family Welfare, and so on.
So even if we do assume, erroneously, that today8217;s road users don8217;t mind paying separately for developing more roads they pay for more roads through annual taxes anyway the fact is that the money is more likely to go to the Consolidated Fund of India. From where, as with all money in the Consolidated Fund, the usual lot of politicians and bureaucrats will find some way to ensure it is wasted. Equally important, is whether it is fair to charge customers any more when they8217;re already paying such a high price.
In the case of petrol, for instance, with the government trying to keep the deficit down, and yet keen to subsidise kerosene and LPG, Indian consumers pay around two-and-a-half times the international price. How much more can thecustomer be expected to pay?
And while it is certainly true that prices of diesel are lower than they were a year ago, the fact is that the government has been cheating customers on this as well. When the United Front government decided to open up the oil sector and to phase out the Adminis-tered Price Mechanism APM, the Cabinet had said that diesel prices would be based on international parity 8212; so, with every fall or rise in global prices, Indian prices were to be fall or rise.
Now, the fact is that this has not been done regularly enough the BJP, for instance, has lowered diesel prices only once though diesel prices have been falling every month internationally. And, when they did, at the beginning of the year, it was by far less than the actual fall in global prices. In other words, as in the case of petrol, the Indian consumer is paying higher prices than the global ones 8212; Indian consumers pay around 50 per cent more than their global counterparts for diesel. With the government over-chargingcustomers on most items, the oil pool account will generate a surplus of around Rs 17,000 crore in the current year.
Now, there is a very good reason why the government has to generate a surplus in the oil pool account. It has to use this surplus to pay off the deficit accumulated in the past, when global oil prices were high, and the local subsidies on petroleum products was truly mind-boggling. The point, however, is that the Indian consumer of petroleum products has paid, what is in effect a cess, of at least Rs 17,000 crore in the current year already.
The real reason for the proposal to impose a cess, of course, is that with most sections of industry already clamouring for reduction in duties 8212; a reduction in automobile excise duties is widely rumoured these days 8212; the finance minister has few options left to raise revenues.
It also remains true that, despite a wonderful saving of around Rs 3,000 crore in January8217;s anti-subsidy week, the government will find it next to impossible to make any moremajor cuts in subsidies. The political opposition to cutting subsidies is way too high even though, as P. Chidambaram8217;s White Paper showed, only a fourth of the total subsidy bill of Rs 150,000 crore, goes to what could be called merit8217; areas such as public health, basic education and infrastructure. In which case, it8217;ll be interesting to see what kind of finance minister Yashwant Sinha is: the type who taxes whom he can, or the type that taxes whom he should. The answer may not be too hard to guess.
