The government cannot function without revenue but they should not mindlessly exploit one source alone. Crude oil at $65 per barrel would make petrol available
at Rs28 per litre. Say that central government levies Rs 35 per litre as tax. Then the state government charges 32% of
Rs28 (around Rs 9) then the road tax
of Rs 7 and distribution charges 3–4
per litre, transportation cost on the depending on the distance. This adds up to Rs 90–100 and sometime even more then Rs 100. So, it is evident that government tax is the main component of the end price of petrol and diesel.
Now coming to the problem, Petroleum, cigarette, and liquor are the most heavily taxed commodities in the country. Tax on cigarette and liquor could be with a positive impact of preventing smoking and drinking. But taxing petrol and diesel is counterproductive because it has the inflationary impact on the essential commodities. Further, commutation is not a luxury because it is essential for people to earn their livelihood. It is like taxing the livelihood on the one hand and promoting inflations in essential commodities on the other which is rather difficult for common people to overcome.
By making LPG available at subsidiary rate or through welfare scheme (Ujwala) scheme makes it rather inescapable for government to make it much dearer for other sections of the society which is not included in the scheme. It is actually middle class which largest consumer of LPG which gets hit hard. So, it is better to make renewable energy at the affordable price to overcome hardship faced by common people. In the 90s when crude oil in international market was $100 barrel, petrol was being sold for Rs60 per litre. It makes no sense now when the crude oil is $60 per barrel, the petrol price has crossed more than Rs100 (in U. P) and in Karnataka around Rs94.
This shows that the current problem with regard to the price of petrol is squarely or solely owing to the mismanagement of tax regime, which requires a thorough revision instead of taxing petrol and diesel that are essential commodities which makes still other essential commodities go out of reach of common man. The government needs to relook and reduce tax on petroleum products. Making people addicted to use of LPG and later on taxing them for their dependency on their LPG (Ujwala scheme) is frustrating.
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