Increasing Price of Petroleum Products and Indian Economy

Considering the shock caused by the nationwide lockdown, very high fiscal deficit of the union and state governments and increasing coronavirus infections caused by the second wave, India at this stage cannot afford to derail the economic recovery process just because of high inflation induced by very high petroleum prices in the economy. So it's high time for the central as well as the state governments to not only put aside the greed of collecting high revenues from the petroleum products and reduce the prices of petroleum products without wasting any time through coordinated efforts but also develop a mechanism that can ensure that prices of petrol products remain stable in a given band adjusting the custom duty and VAT in a proportionate way. For this the central government in consultation with the state governments can either set up a commission to come up with a workable formula or migrate to the Goods and Service Tax (GST) regime with a new GST slab for the petroleum products. At present the prices of the petroleum products can be brought down by reducing the excise duty and VAT simultaneously but this should be a temporary practice till a permanent mechanism is in place. Else, over time this greed of the governments would prove more counter-productive than increasing the tax revenues.

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