The Hindu Editorial Analysis | 8th October ’21 | PDF Download

A Tax That Fuels Spend | ET

• 45th GST Council meeting on September17
• Deliberated on the directions of the Kerala High Court as to whether specified petroleum products are to be included under GST or not.
• It maintained the status quo, and decided not to bring petroleum taxation under a uniform GST rate.
• Whenever fuel prices experience adverse volatility, the demand to contain inflationary retail prices becomes a clamour.
• Initially, the rationale seems straightforward: subsuming petrol and diesel in GST will reduce the levies on base prices — from the current 134.37% and 116.32% respectively to the highest GST slab of 28%.
• But the trade-off entails forgoing 106.3% in petroleum taxes and 88.32% in diesel taxes by the central and state governments.
• This is equivalent to a revenue loss of ₹4.27 lakh crore — about ₹1.9 lakh crore in petrol and ₹3.19 lakh crore in diesel.
• So, is sustaining such a revenue loss feasible politically or economically?
• What about determining alternative taxation sources, ensuring funds for development programmes, and sustaining infrastructure expenditures?
• Considering the limited scope of alternatives and a constrained fiscal space, this seems infeasible.
• The central and state governments get ₹51.45 a litre from petrol and ₹45.26 a litre from diesel sales.
• Bringing them under GST would reduce the collection to ₹10.72 and ₹10.90 respectively — a loss of ₹40.69 a litre for petrol and ₹34.36 a litre for diesel.
• India consumes about 2,639 crore litres of petrol and 9,306 litres of diesel annually.
• Under the GST slab, it shall amount to a loss of about ₹3.17 lakh crore for GoI and ₹1.1 lakh crore for state revenues — a total revenue loss of ₹4.27 lakh crore.
• On May 6, GoI increased the road and infrastructure cess from ₹10 a litre to ₹18 a litre.
• From this cess, ₹59,662 crore were allocated towards road construction in 2020-21.
• In the current fiscal, ₹50,000 crore from the cess collections have been earmarked for Jal Jeevan Mission’s ‘Har Ghar Nal’ scheme, and ₹79,147 crore towards roads construction.
• The rest has been dedicated to other infra sectors like railways, airports, power and communication.
• Even state governments are granted a certain portion of the road cess for road construction.
• On February 2, GoI had decided to levy a new agriculture and infrastructure development cess of ₹2.50 a litre on petrol and ₹4 a litre on diesel.
• But GoI had then ensured neutrality of tax burden on consumers by commensurately decreasing the excise duty on fuel.
• GoI also collects excise duty at the rate of ₹12.40 a litre on petrol and ₹9.80 a litre on diesel. Out of this, 41% is devolved to state governments.
• The price for Indian crude oil basket has more than doubled from $33 a barrel in March 2020 to over $74 a barrel in September 2021.
• Taxes from fuel constitute a significant chunk of state revenues.
• At such a juncture, GoI stepped up its spending to keep the economy afloat.
• Countries like France, Germany, Britain, Spain and Japan have costlier petrol than India.

Killing the chills | TH

• The triumphs of science are best appreciated when they make human lives easier or safer, or simply, offer hope.
• The first ever World Health Organization (WHO)-approved anti-malaria vaccine must count among those triumphs.
• The approval marks a milestone in a timeline that records a long and laborious process to grapple with malaria, and somehow make it less of a killer.
• The vaccine that WHO has approved — RTS,S — has been used in pilot programme participants (children and infants) in Africa from 2015 after it got a nod for this specific use from the European Medicines Agency.
• With this vaccine, which will significantly reduce the severity of cases and prevent deaths, hope has sprung anew that humankind might retard in its tracks a pathogen that has stalked sub-Saharan Africa and several other parts of the world for years now.
• WHO Director-General Dr. Tedros Adhanom rightly termed it as a historic moment, achieving a breakthrough not only for malaria control but also child health and science itself.
• The malaria vaccine, RTS,S, which has been in the making for nearly 30 years, acts against P. falciparum, believed to be the most deadly malaria parasite globally.
• As per WHO, in 2019, nearly half the world’s population was at risk of malaria, while most cases and deaths occur in sub-Saharan Africa.

• There were an estimated 229 million cases in 2019, and malaria deaths stood at 4,09,000, with the WHO African region carrying a disproportionate burden — 94% of cases and deaths.
• Children under five are the most vulnerable group affected by malaria; in 2019, they accounted for about two thirds of all malaria deaths.
• WHO said it was making a recommendation for use based on the key findings of pilot projects implemented in child health clinics in Ghana, Kenya and Malawi over two years.
• Data and insights gathered from these studies showed that the vaccine was not only feasible to introduce but that it also improves health and saves lives.
• Remarkably, it facilitated equitable access to malaria prevention, even during the COVID-19 pandemic, helping reach even hitherto unreached populations.
• The next step should be speedy and meticulous implementation of the scientific miracle from the lab to the field.

Stronger at the grassroots | TH

• The Panchayati Raj, first adopted by Nagaur in Rajasthan on October 2, 1959, has expanded vastly.
• There are now 2,60,512 Panchayati Raj Institutions (PRIs) represented by about 31 lakh elected members across India.
• This system of local self-governance, where people in the villages participate in the decision-making process, is the backbone of democracy.
• The People’s Plan Campaign and Vibrant Gram Sabha Dashboard, rolled out this year, aspire to strengthen the Panchayati Raj system by making gram sabhas more vibrant.
• Unlike other disasters like earthquakes, COVID-19 is an unusual crisis as it is long-drawn and affects people everywhere.
• When the traditional top-down disaster response system was compromised during the bad months of the pandemic, it was PRIs that played a remarkable role.
• They helped reduce risks, responded swiftly and thus helped people recover quickly.
• The PRIs provided essential leadership at the local level.
• They performed both regulatory and welfare functions.
• During the nationwide lockdown, PRIs set up containment zones, arranged transport, identified buildings for quarantining people and provisioned food for the incoming migrants.
• Moreover, effective implementation of welfare schemes like MGNREGA and the National Rural Livelihood Mission quickened the pace of recovery while ensuring support to the vulnerable population.
• Gram sabhas act as a sounding board for diverse ideas and opinions.
• During the pandemic, gram sabhas resolved to adhere to COVID-19 norms.
• In addition, regular engagement with frontline workers like ASHA workers and Anganwadi workers through committees bridged the trust gap between the community and the officials.
• During the COVID-19 crisis, they organised community-based surveillance systems involving village elders, the youth and self-help groups (SHGs) to keep a strict vigil in quarantine centres and monitor symptoms in households.
• More recently, their role in mobilising citizens for COVID-19 vaccination is exemplary.
• The Yokohama strategy during the International Decade for Natural Disaster Reduction in May 1994 emphasised that it is important to focus on disaster prevention, mitigation and preparedness rather than disaster response alone, to reduce vulnerability.
• One, it is crucial to include disaster management chapters in Panchayat Raj Acts and make disaster planning and spending part of Panchayati Raj development plans and local-level committees.
• This will ensure citizen-centric mapping and planning of resources.
• Various insurance products customised to local needs will build financial resilience of the community.
• Two, conducting regular location-specific training programmes for the community and organising platforms for sharing best practices will strengthen individual and institutional capacities.
• Assigning roles to individual members and providing them with the necessary skills can make such programmes more meaningful.
• Three, since the community is usually the first responder in case of a disaster, community-based disaster management plans would help.
• These would provide a strategy for resource utilisation and maintenance during a disaster.
• Such plans should tap the traditional wisdom of local communities which will complement modern practices.
• Moreover, financial contributions from the community should be encouraged through the establishment of community disaster funds in all gram panchayats.

Just Cut It | ToI

• The price of a barrel of the Indian basket of crude oil breached the $80 mark this week.
• It’s risen by about 60% since June, when mobility began to increase after the second wave.
• The retail pump price of petrol has gone past Rs 100/litre mark, partly on account of rising crude price.
• The real hit however has come from the unusually high level of taxes.
• On 1 October, the pump price of petrol in Delhi was Rs 101.95, of which taxes and commissions made up Rs 60.28.
• Fuel taxes have been an easy option for governments to shore up revenue during the pandemic.
• For GoI, revenue during 2020-21 from excise collections on fuel was Rs 3.44 lakh crore, higher by 74% year-on-year.
• This dependence on fuel taxes makes governments reluctant to lower them even when the economy’s aggregate demand is weak.
• The defence of high fuel taxes is that it goes into government spending on public goods.
• Fiscal policy is about designing a tax and spending package to influence economic growth.
• There are a multitude of taxes, and their rates should be in sync with the prevailing economic context.
• The context is that aggregate demand is weak because households have lost spending power.
• To illustrate, India has had a loose monetary policy for two years even though inflation has been relatively high.
• The unusual situation prevails because demand is weak and supply shocks have led to price spikes.
• The worst hit by an economic contraction are the relatively poorer households.
• In a country where over 80 of 100 passenger vehicles sold are entry level two-wheelers, high fuel taxes can only squeeze them further in an already difficult situation.
• In volume terms, fuel consumption is relatively inelastic.
• Extra revenue from fuel taxes comes partly at the cost of GST as spending elsewhere has to be reined in.
• High fuel taxes in the current context have adverse distributional effects.
• GoI should take the lead and cut its excise duty. Some states have already shown the way.

NEWS

• PM Modi says govt aims to set up at least one medical college in every district; inaugurates 35 PSA Oxygen Plants
• President Kovind inaugurates 450 bedded Govt Teaching hospital at Chamrajnagar in Karnataka
• Health Ministry says, over 93 crore vaccine doses administered in country so far
• Govt to grant fresh tourist visas to foreigners coming via chartered flights from Oct 15
• Finance Ministry releases Rs 40,000 cr to states, UTs to meet GST compensation shortfall
• FM says infrastructure development is necessary action and has ripple effect on country’s economy
• India’s ties with ASEAN are rooted in history, geography and culture: EAM S Jaishankar
• India Joins High Ambition Coalition for Nature and People
• Indian Air Force to celebrate its 89th anniversary tomorrow
• Skill Development will be the core of all govt schemes: Piyush Goyal
• Vandalisation of gurdwara in Kabul raises concern not only for India but for world as well: MEA
• China-US hold ‘constructive’ talks in Switzerland seven months after acrimonious Alaska meeting
• Denmark PM Mette Frederiksen to begin 3-day India visit from October 9
• India, Nepal review implementation of ongoing cross-border railway links

Q.) India is facing severe crisis of which fuel?

1. Petrol
2. Diesel
3. Gas
4. Coal

Q.) Which country has claimed that it has overcome the Covid-19 crisis, recording its lowest number of infections this month since the summer last year?

1. India
2. UAE
3. China
4. USA

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