Fuel tax relief: A welcome move

But as the political and policy debates on fuel prices gather momentum, the timing of the price cut does raise the question on whether it was politics or economics which was the trigger

The Union government’s decision to reduce excise duties on petrol and diesel by ₹5 and ₹10 per litre is a welcome step. This newspaper had been arguing that the persistence of high duties on petrol and diesel despite a rise in international crude prices in the last one year was a negative fiscal stimulus. While the latest decision has not brought back excise duties to pre-pandemic levels, the relief in prices is not insignificant. The reduction in fuel prices will also ease the inflation outlook going forward, although the international surge in commodity prices is worrying.

The Bharatiya Janata Party (BJP) has criticised the Opposition-ruled states for not cutting their state taxes. The Opposition is asking for a higher cut from the Centre (Bloomberg)

The Bharatiya Janata Party (BJP) has criticised the Opposition-ruled states for not cutting their state taxes. The Opposition is asking for a higher cut from the Centre. We will also see the customary delinking of international prices and petrol-diesel prices as elections in Uttar Pradesh and other states come closer.

But as the political and policy debates on fuel prices gather momentum, the timing of the price cut does raise the question on whether it was politics or economics which was the trigger. Important government functionaries have given justifications for high taxes on fuel in the past. The tax-cut came immediately after the BJP’s loss in bypolls in Himachal Pradesh and Rajasthan. To be sure, there is nothing wrong in a government taking cues from election results to tweak its policies. In fact, the BJP has shown remarkable agility in course-correcting after electoral reverses due to economic discontent. The announcement of the PM-KISAN scheme, which came after the BJP’s loss in the Madhya Pradesh, Rajasthan and Chhattisgarh elections of 2018 is the biggest example of this.