People's Democracy

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


No. 04

January 23, 2011


Petro Hike: Glaring Contrast

between India and Vietnam

From N S Arjun in Hanoi


The way Vietnam government dealt with the recent increases in global prices of crude oil is a total contrast to the way the Indian government has responded. Given the fact that Vietnam has barely any refining facilities of its own within the country and hence totally dependent on imports, this contrast is all the more glaring.


With crude oil touching $101 per barrel, the Vietnam government took two decisions to shield the people from the burden. One, it decided to directly compensate the petrol dealers by Vietnamese Dong (currency) 600 per litre (around 18500 Dong is equal to one dollar), thus taking the total direct subsidy it offers to VND 1600. Part of the subsidy is also paid by the consumers here through the “Price Stabilisation Fund”. On every litre the consumer buys, VND 300 goes to the fund.


The other important step that the government took was in cutting the import tax on refined petroleum products to zero! Already the government had cut the import taxes on petroleum products twice in recent months, lowering the tax on imported petrol from 20 per cent to 6 per cent and the tax on diesel from 15 per cent to 2 per cent. Now it has been made zero. In India, apart from taxes on petroleum product, last year Government imposed 5% import duty on crude oil also.


On top of high tax / duty Indian government has raised within a matter of few weeks the price of petrol by a whopping Rs 5.50 per litre. The government also heartlessly refuses the repeated demand of the Left parties to cut the high duties on petroleum imports. As has been pointed out time and again, the government has raised taxes / duties by 200 to 300 per cent during the last one decade in accordance with the rising prices of the international crude. The Indian government's claims on subsidies has also been exposed with figures that showed that petroleum sector as a whole pays Rs 100 as taxes and duties to the Government while Government extends a subsidy of Rs. 25 only. With deregulation in force, we are now witnessing hikes almost every month.


In contrast, the pro-people approach of the Vietnam government, by way of heavy subsidies and favourable tax policies, have resulted in a situation where the domestic petrol prices have increased only 2.8 per cent since early 2010, compared to nearly 45% increase in petrol cost in India since May 2009 when UPA II Government came to power.