Rich pay less (Rs50) while poor pay more (Rs60)/litre of fuel - fix it now!

November 03, 2023 (MLN): While most of us took a sigh of relief that the government did not enhance the fuel prices - though it is largely a price taker- despite marginal currency depreciation and heightened geo-political risks in the Middle East.

In fact, the government has increased PDL on Diesel from Rs55 to 60/litre. But guess what- no thought has gone to taxing the rich yet. 

Today, the price of Hi Octane is Rs30/litre more expensive (Rs313/litre) than conventional petrol prices of Rs283/litre. That 10% delta is justified as HOBC is a much higher quality fuel predominantly for luxury cars with high engine performance.

What difference would it make to people earning millions a month, keeping cars worth Rs1-3 crores and having billions in wealth to pay Rs20-30% more than the poorer middle class? Zilch. 

To maintain their fleet of luxury cars, paying insurance worth hundreds of thousands a year, a petroleum Levy at Rs100 would only dent their pockets by Rs10,000 per month or $35 based on 200 litres per month consumption That's one-day fine dining for them.

A Rs60/litre is already imposed on the poor why not increase PDL from Rs 50 to 100/litre on HOBC? Better, share the booty with provinces if Sales Tax can be increased and let districts spend that on schools, healthcare and subsidized food. 

Unfortunately, policymakers everywhere require a push or "direction". It doesn't affect them that much as it affects the common man, poor people or fair taxpayers.

We appreciate the recent gas and electricity price hike taxing the rich more as well as the poor.

Perhaps, this Rs50/litre is an honest omission but the time is still ripe to show people that Richie Rich will pay due taxes as well. No problems with the rich, just tax everyone fairly.

Every penny counts when you are structurally reforming the economy.

The author is an independent economic analyst and writes on Twitter and Linkedin.