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WHY PETROL PRICES ARE A PRE-CURSOR TO A GST BATTLE

Another GST Battle Brewing on petrol prices


As the petrol, gas and diesel prices shoot up, the memes on the central government abound. Old tweets are dug up and replayed over and over again to showcase the irony of the situation and how the tables have turned.


In case you have not seen it, mimicry also has taken centre stage with 3 million views within a week of being uploaded.


As the hue and cry over petrol price rises, the central government has gone into a spin over drive with a variety of reasons to explain the price rise.


But the bottomline remains the same: Crude Barrels are currently ~$60 per barrel (159 litres) and the price is Rs. 100. When the price was $150 per barrel, the price was Rs. 70 in 2014. 

To put it in bigger context, assuming a dollar conversion rate of 75 (march 9, Indian government is earning Rs. 5,00,000 (5 lakh) extra per barrel and yet wants people to believe that it is managing the situation.



Sinister Themes: Cripple state revenues through petrol prices


However one of the hallmarks of the current government is killing off of the federal structures. And petrol prices are the last stronghold of state independence. Three items have still propped up the state revenues: Petrol, tobacco and alcohol. All three are outside the centre's ambit. 


And therein lies the devil in the details.


Now there are a bunch of experts who are advocating that petrol prices should be under GST and it will reduce the price of petrol.


While the calculations can be played around with, the fact of the matter remains that if the prices are reduced, then there will be a revenue loss to both the state and central governments. Yet, the central government wants to bring this under the ambit of GST.


Why so ? 



Make states beg for money:

As we have seen that during the pandemic and even before that, Central government was not giving GST to the states and using it as a political tool to make states bend to their will.


On 17, Feb 2021, the central government had not paid close to 3 lakh crores to states and after some wrangling finally released 84000 crores. 

However, the states were able to function despite the fact that they did not have any money because of the taxes received through diesel and petrol prices. 



Post GST:


States which are already hamstrung will be weakened further and will have no autonomy left since they will have no money. 


So it is very clear, that the idea of bringing GST for petrol is not out of benevolence for the common man, but to finish off any independence the states have and ensure that they become subservient to the central government.
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