A tale of two oils

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Barring the rich, it’s a twin oil shock for all Indians. While one category of oil moves wheels, the other fuels kitchens. Both have been on fire for past several months causing severe stress to the wallets of common citizens. The hefty rise in the prices of both categories has impacted the broadly sensitive figure of retail inflation. The country is critically dependent on imports to meet the domestic consumption of both types. However, the response of the government to their price rise is vastly different.

On Saturday the government brought down the import duty to decades-low on edible oils to rein in prices. This was the second reduction in duties in four months. The move would reduce the retail prices of all vegetable oils such as palm oil, sunflower oil and soyabean oil. The efforts to reduce prices on edible oils will certainly be appreciated in different quarters.

However, the administration is strangely silent on the need to price of petrol and diesel that is hurting the interests of the common man more than any other commodity can. While any price rise in petrol is largely confined to the wallet of those who use petrol-driven vehicles, any rise in the retail cost of diesel spreads throughout the economy since all commodities are carried in trucks across long distances and trucks run on diesel.

India subjects petrol and diesel to the highest taxes in the world and the revenue collected on these two has exceeded the Union budget projections for FY22. Reports have said that an immediate drop in excise to the tune of Rs 8-8.50/litre is possible without disturbing the revenue projections. There is a lot of academic – and idle – talk to bring both the fuels under GST. However, no government would submit it in writing before the GST Council to initiate a formal discussion. Petrol and diesel are perhaps the only commodities in the country where the taxes comprise significantly more than the factory (refinery in this case) gate cost. Both the Centre and state governments should put their heads together to stop plucking the low-hanging fruit in the economy garden and concentrate on sustainable ways of deepening and broadening the revenue base to fund its expenditure.