Petrol prices and the threat of US sanctions
The threat of US sanctions if dependence on Iranian oil is not reduced hangs over India. In the age of oil price inelasticity, this is a clear inflationary problem. This article from IE can be read as an indication that a significant part of the solution could be political:
With the Goa government proposing a reduction in petrol prices by Rs 11, Minister of State for Parliamentary Affairs Rajiv Shukla today said the other states especially the BJP ruled ones should emulate the step to ease the burden on the common man.
“As far as petrol and diesel are concerned, states get more tax than the Centre from petroleum products. They impose more tax and get more. If states abolish taxes, then it will ease the burden on the common man,” he said.
Talking to reporters outside Parliament, he said long before Goa took the step, the Vilas Rao Deshmukh government in Maharashtra and the Andhra Pradesh government had initiated such a move.
“Central government had already reduced the custom duty…the share of the state govt is far bigger as far as money generated from petroleum products is concerned. State government should think over this (emulating Goa),” he said.
Shukla said the state government gets about 1.6 lakh crore as tax from petroleum products.
The Manohar Parrikar government had yesterday announced that only 0.1 percent value added tax (VAT) component would be levied by the state government during the presentation of the Budget.
Of course, party politics will never be separated from long term policy.