I think we should let only one party rule for ever. At least somewhere down the line they will pity us and will spare us this imposition of new taxes. Everytime a new party comes in power, they are like, "oh, previous Govt. messed up finances. We need to set things in order. So, let us raise some money for this." And there you go.
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Actually the buffer(i.e the excise duty increase) will be of more helpwhen crude hits a high price. When diesel/petrol price touch their previous peak levels that is when the government would make an excise duty cut.
This will help the government to not burden the public if and when crude goes up. Until then they are filling their coffers. On another note even though the price of diesel has gone down our bus/ coach fare haven't been reduced so far.(At least in Tamil Nadu)
Maybe, they are buffering too. They will give us relief by not raising ticket prices when diesel prices hit the roof.
Funny, everybody is buffering for us now. So kind of them, eh? Hope the same govts remain in power when it is time to pay back. Else we will hear the next round of "buffering" story.
I am only trying to point out that the increase in excise duty might be a blessing in disguise down the line it may help the government in its reforms. Well obviously everything is dependent on whether the intentions of the Government are right or wrong. I do agree that buffering can easily be made a scapegoat. I am only giving the benefit of doubt to the government as some hard measures might improve our economy.
MUMBAI: The recent rally in crude prices from $40 lows is not a trend reversal as demand would be muted in 2015 amidst surplus in the market, one of the world's leading oil experts has said. Oil prices could drop again to $35-$40 per barrel, Fereidun Fesharaki, chairman of the global consultant Facts Global Energy toldETin an exclusive interview.
Crude oil prices have plummeted almost 60% since June due to oversupply but has rallied in recent weeks to touch $60 a barrel for the first time in 2015. Calling the recent rally a "blip", Fesharaki said he expects prices to remain muted but dismisses the view in some section of the market that crude oil prices could fall up to $20 per barrel.
"I think it can go down to $35-40 a barrel levels. I don't believe in the $20 theory. Although it is not impossible that it may touch $20 for a few days but it can't stay there. It can go up to $35-40 and stay there for a few months," he said.
The Organization of Petroleum Exporting Countries, primarily Saudi Arabia, is reluctant to cut production and so is Iraq, which is trying to increase revenue after years of neglect, war and destruction. Fesharaki believes that Saudis are primarily motivated by concerns over the potential threat from US Shale gas and very little to do with the geopolitical factors. "There is more supply than demand. We are storing onshore and offshore and running out of space. In the second quarter, when the seasonal demand is down, we could see another major drop in the price," he said. "The idea of looking for stable prices is a false ambition. Stable prices exist only if someone is fixing the prices. So the world will see for the next few years crude in the range of $50-$80. This would be a volatile market," he said. The fall in crude oil prices has benefitted India with its trade deficit hitting an 11-month low in January at $8.3 billion.
When asked if he expects the Indian government to cut investment on oil exploration and production activities due to weak crude prices, Fesharaki said "They are not doing it anyway. The key issue in India is the gas pricing of the government is regressive. Nobody is doing anything anyway." He said the government's decision to fix gas prices at $5.6 per mmbtu, even lower than the $8.4 approved by the previous government would discourage investments.
So now it is party time for JH Govt. VAT hiked on petrol & diesel. Takes the prices of petrol up by about Rs. 2 per liter and diesel by Rs. 2.62. For how long and by how much are we supposed to fill the coffers of the in-efficient Govt. machinery?
Last edited by saket77 : 24th February 2015 at 10:42.
I am expecting that the surplus money made due to this increase of taxes and duties is put into good use.
This should somehow be adjusted by the change of income tax slabs that we expect to be announce on 28 February. So, some wins and some losses.
It's unfortunate to see different state governments jacking up the VAT on fuels to bring in more revenues. This (along with the increase in central excise) is negating the fall in international crude prices, which have thankfully started slipping again. But there is some hope.
One good thing that has happened recently is that the recommendations of the 14th Finance Commission (a constitutionally provisioned body) have been accepted by the central government. This means that going forward, state governments will receive 42% of the central tax collections (up from the current 32%). This is the biggest single increase, as opposed to the paltry 1% or 2% that was the norm with earlier Finance Commissions. Better still, is the fact that most of the funds that are to be made available to the state governments is going to be "untied" i.e. they are not funds that are solely meant for the implementation of schemes designed by the centre.
Such "one-size-fits-all", "top-down" schemes themselves are going to be limited in the future, with the state governments being free to tailor them as they deem fit, according to their priorities and prevailing local conditions.
Unsurprisingly, this has gone down well with the state governments, cutting across the political spectrum, although some would be tight-lipped on this (for obvious reasons). This is a much desired and welcome big step in the direction of "co-operative federalism" and the concept of "Team India" that, along with the scrapping of a notorious & crappy top-down institution (a copy of a similar thing from an utter failure of a country that inevitably & deservedly collapsed), would hopefully go a long way in encouraging equitable all-round economic development and the resulting improvement in the quality of life for citizens.
Of course, this move is not without its pitfalls. Some state governments may be tempted to use the increase in funds availability to go on a populist spending spree, instead of judiciously using the funds to cut back on over-taxation (such as VAT on fuels & road tax on vehicles) and to usher in development. And the central government itself may find that it has to drastically cut down on unnecessary expenditure going forward, and concentrate primarily on its core areas of constitutionally sanctioned responsibility.
In the long run, I think the benefits would outweigh the negatives. It would force the central government to pursue a path of financial prudence and cut down on unwanted, excess bureaucracy. As for the state governments, they will have very few reasons to put the blame on the centre as a cover for their own failures and shortcomings. This will make them more accountable for their own deeds among the citizenry, who would also be able to distinguish easily as to who is responsible for what success/failure and reward/punish them accordingly at ballot time.
I think this is also an incentive to the state governments for forming a consensus that has enabled the upcoming GST. Whatever revenues they would have lost through the implementation of GST (inspite of the compensation mechanism), the incoming, automatic, "untied" revenue bonanza from central taxes would cover the shortfall, and still leave them with more money in hand.
I hope all the state governments use these welcome additional funds judiciously and stop their tendency of over-taxation. Some states have very high road taxes and others put a big VAT component on automotive fuels. I hope this tendency is completely halted (if not reversed) in the future. And I hope the centre also cuts down on its bloated expenditures, trims itself to become lean & fit and works on creating an environment for all round development in partnership with the states.
Last edited by RSR : 25th February 2015 at 08:39.
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