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Petrol, Diesel Prices Can be Cut, But Lack of ‘Political Will’ Keeping Prices in India Highest in World: SBI Economists

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Decreasing petrol and diesel price under gst sbi ecowrap report 2021

Shimla-Petrol and Diesel prices in India could be brought under control and their price could be reduced to Rs. 75 and Rs. 68, respectively, says the SBI’s Ecowrap report released by its Economic Research Department. The Indian Government can do this simply by brining these fuels under the ambit of the Goods and Services Tax (GST), the report said.

However, according to the report, lack of political will is keeping Indian oil product prices at one of the highest in the world. This lack of will arises from the fact that Centre and States are loathe to bring crude oil products under the GST regime as Sales Tax/VAT on petroleum products is a major source of own tax revenue for them. The states, in particular, would face a loss in revenue.

However contrary to this possibility, the government had been maintaining that it doesn’t control fuel prices. On February 17, 2021, on a day when petrol crossed the ₹100 mark, Prime Minister Narendra Modi had blamed it all on the previous governments. 

The report said that one of the unfinished agendas of the current GST regime is bringing petrol and diesel under GST.

Every state has its own tax structure. The states choose to levy a combination of ad valorem tax, cess, extra VAT/Surcharge based on their needs. These taxes are imposed after taking into account the crude price, the transportation charge, the dealer commission and the flat excise duty imposed by the centre. The multiple taxes have made petroleum products prices one of the highest in the world, the report said.

share of states in petrol taxes

The base price of Rs 75 for petrol and Rs 68 for diesel has been calculated on the following assumptions: Crude price at $60/bbl, exchange rate of Rs 73 for a dollar, transportation charges of Rs 7.25 for diesel and Rs 3.82 for petrol, dealer commission of Rs 2.53 for diesel and Rs 3.67 for petrol, cess of Rs 30 for petrol and Rs 20 for diesel, GST rate at 28 per cent and petrol consumption growth rate of 10% y-o-y and 15% for diesel y-o-y.

Using all these assumptions, the researchers have found that the base price for petrol and diesel comes out to be Rs 75 and Rs. 68, respectively at pan India level. At this base price, with multiple simulations Centre and States have a revenue deviation from budget estimates by only Rs. 1 lakh crore 90.4% of the GDP) after adjusting for the increase in consumption with the intended price cut.

The report further said that a dollar increase in the crude oil prices will push up the petrol price by around 50 paisa and diesel prices by around 150 paisa and bring down the overall deviation by around Rs. 1500 crore under the suggested baseline scenario.

If this tax structure is used for the Financial year 2022, when Centre and states taxes are already so high, we see that states which have the highest rates are losing revenue if they shift to this GST regime. But this flat taxation structure brings in uniformity and as per the calculations, it brings down the burden of taxes on the common man by almost Rs. 10-30 depending on the product consumed and the state in which it is consumed, the report said.

Additionally, it benefits some states which do not drastically tax their petroleum products, like Uttar Pradesh.

“Interestingly, our simulation exercise suggests that when crude oil/bbl declines by 10 dollars, Centre and states could save close to Rs 18,000 cres, if they keep the petrol prices at baseline Rs 75 and diesel at Rs 68 and don’t pass on the benefit to consumers,” the report said.

Further, the report recommended that the Government should build up an oil price stabilization fund which can be used in bad times for compensating revenue loss by cross subsiding fund saved from good times, without hurting the consumer.

Further, since November 2020, the prices of non-subsidized cylinders have increased from Rs. 594 to Rs 819 in Delhi, a substantial increase of Rs. 255 er cylinder. The data on DBTL (Direct Benefit Transfer for LPG) indicate that the subsidy amount has sharply plunged to merely Rs. 3,363 crores in April-December 20220 period from Rs 22, 635 in Financial Year 2020. There is negligible or no difference between subsidized and non-subsized cylinder.

Price hike in lpg cylinders by sbi report

The report also said that though the government has announced to give one crore more free connections to the needy over the next two years, affordability barriers still exist. The government should focus on the affordability issue and to achieve this, the SBI researchers have suggested a set of measures.

Separately, for the LPG cylinders, the report proposed an increased and graded subsidy to provide to poor consumers which can be tapered off over a period of, say, five years. For this, the Government can create a comprehensive merged database using database of Ayushman Bharat, PM-KISAN, PMJDY, PMUY and MUDRA and then provide these people with maximum four free cylinders in a year. Even if five crore people are eligible for this then the total cost to exchequer per year will be maximum Rs 16,000 crore.

Besides, the report suggested that the Government might cancel its borrowing planed in the last two weeks of March 2021, totaling Rs. 49,000 crores.

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Himachal Records 16 COVID-19 Deaths Including a 16-Year-Old – Highest in a Day This Year

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COVID-19 update himachal pradesh april 20

Shimla-The fatality rate due to the COVID-19 spread is witnessing a sharp increase in Himachal Pradesh. Yesterday, the state had reported 13 COVID-19 deaths, but today the fatalities rose to 16 in a day. A total of 1340 new cases were recorded today till 7 pm. Kangra district reported the highest six deaths, followed by Shimla (4), and Una (3).

Find more details about the deceased below:

Highest covid 19 deaths in himachal pradesh

The infection claimed the life of a 16-year-old girl in Una district. According to the state health department’s official report, she developed severe pneumonia and was a patient of Diabetes Mellitus Type-1. Other deceased aged between 36-78 years.

Earlier today, the Deputy Commissioner of Una, Raghav Sharma, had issued orders to keep markets/shops closed on Sundays and issued timings for the remaining days. A prohibition was imposed on all sorts of events and social gatherings. The orders would come into effect from April 22, 2021.

Also Read: Himachal: Govt Announces More Restrictive Measures, DC Una Closes Shops on Sundays, Issues Timing for Other Days

Further, Chief Minister Jairam today announced more restrictive measures as an attempt to contain the spread (Watch Video Below).

Solan district reported the highest 265 cases, followed by Una (173), Shimla (164) and Sirmaur (155).

Find more district-wise details below:

Himachal pradesh daily covid-19 report april 20

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Himachal: Govt Announces More Restrictive Measures, DC Una Closes Shops on Sundays, Issues Timing for Other Days

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hp govt's new restrictions in himachal pradesh

Una-Deputy Commissioner of Una district, Raghav Sharma, has issued an order for the imposition of new restrictive measures from April 22, 2021, in wake of the ongoing spike in COVID-19 cases and fatalities in the district. The DC also expressed fear of community spread and ordered that markets would remain closed on Sundays in both rural and urban areas of the district.

However, these orders would not apply to drug stores, hotels, dhabas, and restaurants. Further, shops selling dairy, vegetables, fruits and meat would also remain open on Sundays from 7 am to 8 pm. Saloons and barber shops would also be allowed to operate on Sunday between 9 am to 6 pm.

All shops would remain open from Monday to Saturday within the given time period, which is 7 am to 8 pm for fruit, vegetable, meat, and dairy shops, and 9 am to 6 pm for saloons/barber shops, and 9 am to 6 pm for remaining shops.

Also Read: With Neighboring States Going to Curfew, Himachal’s Tourism Sector Again Comes to a Halt

A prohibition has been imposed on the organization of all sort of cultural, religious, political, sports and other gatherings in the district. For attending marriages and funerals, the permission of the district administration would be required.

Today, Chief Minister Jairam Thakur also told the media that the number of people allowed in social gatherings, like marriages, has been reduced to 50 for both indoors and outdoors.

For government employees, working days have been reduced to five days a week and staff capacity to 50 percent. Public transport would operate with only 50 percent capacity.

For marriages or any sort of other social, cultural, political events, prior permission of one week would have to be obtained by applying online at the official portal.

The inter-state transport would remain operational, the government said. People returning from high load states were advised to carry COVID-19 negative reports and obey home-quarantine rules strictly.

Orders for Government Employees from Department of Personnel

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COVID-19 Vaccination in India to Open for All Aged Above 18 Years in 3rd Phase: Govt

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All above 18 in india eligible for covid-19 vaccination

New Delhi-From May 1, 2021, everyone above the age of 18 would be eligible to receive COVID-19 vaccination, the Government of India decided today. As per the government, the decision has been taken as a good amount of coverage of vulnerable groups is expected by 30th April.

Pertinent to mention that a demand was being raised to open vaccination for all amid the peaking second wave of the pandemic which is proving to be deadlier than the first one. On Sunday, former Prime Minister of India, Manmohan Singh, had also written to Prime Minister Narender Modi to be more flexible in deciding eligibility for vaccination as it was the only hope. He had pointed out that when we look at the percentage of population instead of the absolute numbers, we see that only a small fraction has been covered so far. He had also suggested reworking on the current model adopted by the government. 

Singh had asked the Prime Minister to allow states to define who qualifies as a ‘frontline worker’.  Many states wanted to designate bus and taxi drivers, school teachers, municipal and panchayat staff, and even lawyers as frontline workers to make them eligible for vaccination even if they are below the requisite 45 years of age.

Phase-I of the National Covid-19 Vaccination Strategy was launched on 16th January 2021, prioritizing vaccination of Health Care Workers (HCWs) and Front Line Workers (FLWs). Phase-II was initiated from 1st March 2021, focusing on the most vulnerable i.e. all people above 45 years of age, accounting for more than 80% of Covid mortality in the country. The private sector was also roped in to augment capacity.

So far, Emergency Use Authorisation has been granted to two indigenously manufactured vaccines (Serum Institute of India and Bharat Biotech), and a third vaccine (Sputnik) that while presently manufactured abroad will eventually be manufactured in India, the GoI said.

The government said that in its Phase-III, the National Vaccine Strategy aims at liberalised vaccine pricing and scaling up of vaccine coverage, the GoI said. This would augment vaccine production as well as availability, incentivising vaccine manufacturers to rapidly ramp up their production as well as attract new vaccine manufacturers, domestic and international. It would also make pricing, procurement, eligibility and administration of vaccines open and flexible, allowing all stakeholders the flexibility to customise to local needs and dynamics, the GoI said.

The main elements of the Phase 3 Strategy of the National Covid-19 Vaccination program that would come in effect from 1st May 2021

(i)      Vaccine manufacturers would supply 50% of their monthly Central Drugs Laboratory (CDL) released doses to Govt. of India and would be free to supply the remaining 50% doses to State Govts. and in the open market (hereinafter referred to as other than Govt. of India channel).

 (ii)    Manufacturers would transparently make an advance declaration of the price for 50% supply that would be available to State Govts. and in the open market, before 1st May 2021. Based on this price, State governments, private hospitals, industrial establishments etc would be able to procure vaccine doses from the manufacturers. Private Hospitals would have to procure their supplies of Covid-19 vaccine exclusively from the 50% supply earmarked for other than Govt. of India channel. Private Vaccination providers shall transparently declare their self-set vaccination price. The eligibility through this channel would be opened up to all adults, i.e. everyone above the age of 18.

(iii)    Vaccination will continue as before in Govt. of India vaccination centres, provided free of cost to the eligible population as defined earlier i.e. Health Care Workers (HCWs), Front Line Workers (FLWs) and all people above 45 years of age.

(iv)    All vaccination (through Govt. of India and Other than Govt. of India channel) would be part of the National Vaccination Programme, and mandated to follow all protocol such as being captured on CoWIN platform, linked to AEFI reporting and all other prescribed norms. Stocks and price per vaccination applicable in all vaccination centres will also have to be reported in real-time.

(v)     The division of vaccine supply 50% to Govt. of India and 50% to other than Govt. of India channel would be applicable uniformly across for all vaccines manufactured in the country. However, the Government of India will allow the imported fully ready to use vaccines to be entirely utilized in the other than Govt. of India channel.

(vi)    Govt. of India, from its share, will allocate vaccines to States/UTs based on the criteria of extent of infection (number of active Covid cases) & performance (speed of administration). Wastage of vaccine will also be considered in this criterion and will affect the criteria negatively. Based on the above criteria, State-wise quota would be decided and communicated to the States adequately in advance.

(vii) The Second dose of all existing priority groups i.e. HCWs, FLWs and population above 45 years, wherever it has become due, would be given priority, for which a specific and focused strategy would be communicated to all stakeholders.

(viii) This policy would come into effect from 1st May 2021 and will be reviewed from time to time.

Feature Photo: ivvndiaz/unsplash

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