People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

Vol. XXX

No. 25

June 18, 2006



Heed People’s Voice


The country has witnessed massive protest actions and demonstrations against the recent hike in the prices of petroleum products. These Left parties-led actions generated a knowledgeable public debate on how such a hike could have been avoided and the common man spared the extra burden. The alternatives suggested by the Left has had such an impact that the Congress party was forced to announce that its state governments would forego the state sales tax revenue increase as a result of this hike. This is nothing but tokenism and a desperate effort to meet the Left’s reasoned argument that this hike would not have been necessary if the central government reduced its taxes. Instead of doing this, the centre is trying to pass the buck on to the state governments. It is also making an unsuccessful attempt to generate a pressure on the Left parties asking the state governments in Bengal, Kerala and Tripura to follow suit. 


We have repeatedly argued through these columns that the taxes levied by the central government on petroleum products are ad valorem taxes. As the international price increases, so does the central government’s revenue in the same proportion. For instance, if the international price is Rs. 100, a 10 per cent tax would fetch the government Rs. 10. If the international price doubles to Rs. 200, then the same 10 per cent tax would fetch the government, Rs. 20. All that we are saying is that the government can reduce its tax rate from 10 to 5 and still collect the same amount of revenue that it had calculated in its budget. If this were to be done, then the need to increase prices to meet the increase in the international prices would not arise. 


Clearly, therefore, the argument that the central government gives that if it reduces taxes, then it shall not have sufficient resources to implement the socially necessary programmes, is completely tenuous. By foregoing the excess revenue due to hike in international prices, the central government is in no way adversely affecting its plans or calculations on which the implementation of the socially necessary programmes is based. The central government earns a windfall bonanza of extra revenues which it doesn’t want to part with. Instead, it imposes burdens on the people to meet the deficit caused by the rise in the international prices. 


While the central government refuses to part with its bonus revenues, it is urging the state governments to reduce their state sales tax. With much fanfare, the Congress government in Andhra Pradesh and Congress-led government in Maharashtra announced a reduction in the sales tax. This resulted in reducing the price by around 30 paise per litre. Such tokenism is being passed off as concern for the people! In any case, it must be noted that the sales tax on petrol in Andhra Pradesh is 32.66 per cent, in Maharashtra, it is 29 per cent while in Bengal, it is only 25 per cent. Similarly, for diesel, it is 21.33 per cent in Andhra Pradesh, 30 per cent in Maharashtra, and 17 per cent in West Bengal. West Bengal is in any case providing relief by charging a lower tax rate than the Congress-led state governments.


Further, it must be noted that in the year 2005-06, provisional figures suggest that the total tax revenue from the oil sector is a whopping Rs. 126600 crores. Of this, the central government receives Rs. 77,800 crores. All the states and union territories of India put together receive Rs. 48,800 crores. Each state can reduce the extra revenue but this amounts only to a miniscule amount. If the central government foregoes its extra revenues, then the price hike would have been unnecessary. 


In any case, the CPI(M) Central Committee has declared that the day the central government reduces its taxes, on that very day, the CPI(M)-led governments in West Bengal, Kerala and Tripura will do the same. 


An amusing aspect of this people’s protest has been the utter confusion that continues to plague the RSS/BJP. Seeking to follow the CPI(M)’s lead, the BJP announced that its state governments will not reduce state taxes. The RSS, however, came to the rescue of the Congress by announcing that the BJP state governments must follow suit! The more amusing part of its plight, apart from the fact that the people simply did not respond either spontaneously or enthusiastically to its protest actions, is its inability to comprehend how the CPI(M) and the Left can be supporting the UPA government and at the same time rallying people’s discontent through protest actions as the means to pressurise the government to stop imposing fresh burdens on the people. One strain of their argument runs as follows: The Left’s protests are ineffective as the government increases the prices any way. Another strain states: the Left agrees with such decisions in private but organises protests in public – the so-called double-speak of the Left. 


However, what are the facts? The UPA government arguing that the international prices have increased by $ 20 per barrel since the last price revision (standing at $70.92 in May 2006) suggested to increase the price of petrol by Rs. 9.33; diesel by Rs. 10.43, kerosene by Rs. 17.16 per litre and a gas cylinder by Rs. 114.45. After stiff resistance by the Left parties, the government finally chose to hike the price of petrol by Rs. 4 and diesel by Rs. 2 per litre. Even this, in our opinion, is unnecessary on the basis of the above reasoning. 


The BJP, unable to stomach such reality, as is its wont, embarked on its familiar gobbellisian disinformation campaign. This, however, cannot cut any ice. Under its six-year rule, the NDA government hiked the prices of petroleum products substantively on eight occasions. It was the BJP-led NDA government that dismantled the administrative price mechanism that governed prices of petroleum products hitherto. Sure, this decision was taken by the United Front government in 1997. But that, however, was to be accompanied by the elimination of all taxes on imported crude. The BJP-led NDA government refused to do so as it was eager to keep receiving the windfall bonanza of revenues resulting from a rise in international prices. Therefore, on every count, on which their protest is based today, they are more guilty than when they were in power. It is no wonder, therefore, that the common people have simply refused to respond to their protest calls. 


Even at this stage, the UPA government must consider the need to reduce its taxes and withdraw the fresh burden that it is imposing on the people.