Earning cash through fuel taxes has become an addiction for our Governments. Like any addiction, this one is also not amenable to any easy cure. Only shock treatments can do that.
Both the Centre and the states have been playing hide and seek with the people on the highly sensitive issue of moving petroleum products into the GST system. When the Modi government adopted the new tax regime in the most dramatic fashion through a midnight Parliament Session, with the golden promise of ‘one nation, one tax’, everything was moved to the new system, but the petroleum products were left out, primarily because it would have robed the Government of a tax resource that helped to mop up any amount of money at will.
It is a different matter that opposition political parties have been shedding crocodile tears about the high fuel prices, which are at record levels despite a recent softening and using the problem to score brownie points in their political campaigns against the BJP. But even these parties, when they are in the government, close their ranks against any move to cut fuel taxes. The states are asking the Centre to reduce its excise duty, which of course accounts for a very high component of the high prices. The State Governments have been laughing away to glory every time petrol and diesel prices because it brings them more revenue, irrespective of the pain it causes to their own people.
The petroleum sector is by far the largest contributor to the overall tax revenue, with the Centre depending on it for 21 percent of its tax revenue and many states being dependent on it to a significant extent.