Keeping Petro-Fuels Outside GST Is Politically Sensible; It Helps Reduce Centre-State Friction


Keeping Petro-Fuels Outside GST Is Politically Sensible; It Helps Reduce Centre-State Friction

With global oil prices weakening, the oil marketing companies are passing on the reductions to petrol and diesel consumers, especially since this is election season.

It is quite possible that both Centre and states will seek to recoup lost revenues once we move back to post-election normality, though the window is narrow till about January-end. After that, we are back to another big general election season, to elect the next Lok Sabha and some state assemblies (Odisha, Andhra).

Given the political nature of pump pricing in petro-fuels, and also the huge revenues generated for both Centre and states, the realistic thing to do is simple: create an oil pool account, where some part of the excess taxes collected when prices are down can be used to subsidise petro-fuels when global prices start soaring, as they did till a few months ago.

It may, in fact, make sense for both Centre and states to maintain separate oil pool accounts, so that the yo-yoing nature of global oil prices does not immediately dent their fiscal maths. Read More

Leave a Reply

Your email address will not be published.