The geo-political ascendancy of India achieved a new milestone this month when it was granted the membership of missile technology control regime (MTCR). This was considered as a major achievement of Prime Minister Narendra Modi’s foreign policy.
The membership allows India to buy or sell advanced missile technology and military know-how from a third-party, in accordance with the guidelines of membership.
However, many analysts viewed the MTCR membership of India as a stepping stone to get into the elite Nuclear Suppliers Group (NSG), which was ironically founded after the first nuclear test conducted by India in 1974. The NSG is poised to meet in Seoul for the 23-24 June plenary and India’s membership will be an important issue to be discussed.
The United States (US) is strongly supporting India’s NSG membership and has been quite vociferous about it, with US Secretary of State John Kerry writing letter to support India’s candidature. Also, in his recently concluded five-nation visit, Prime Minister Modi was able to build a consensus in India’s favour and garner support from Mexico, Japan and Switzerland.
The countries which are still opposing India’s membership are, New Zealand, Ireland, Turkey, South Africa, Austria and China. China, however, has softened its stand and said: “the door is open” for the admission of non-NPT members “but the members of the NSG should stay focused on whether the criteria should be changed.”
The chief contention among the opposing countries is India’s refusal to sign the nuclear Non-Proliferation Treaty (NPT). India maintains that military use of nuclear technology is a matter of its national security and thus denies any negotiation on the topic. Many argue that allowing India would set a precedent for other non-NPT countries such as Pakistan, and weaken the stringent NSG eligibility criteria.
However, many diplomats attribute the opposition of China to its more congenial relationship with Pakistan.
The US is trying to negate the growing influence of China in South-East Asia and aims to develop India as an ally in the developing world.
Several new India-US agreements such as Logistics Exchange Agreement, which provides provision of sharing military facilities between the two nations are in negotiation and may harm the geo-strategic interest of China as it threatens Beijing hegemony in South-East Asia.
This increasing bilateral ties between India and the US is a cause for concern for China and thus it was refusing to recognise India in NSG and lobbying for Pakistan.
The trade benefits associated with NSG is also an important factor in China’s resistance to India’s membership as it is sceptic of granting New Delhi the same benefits as it enjoys in international nuclear market.
India has sizeable deposit of uranium and especially thorium, which can be traded in international market and thus have huge trade potential.
New Delhi argues that it was applying for membership based ‘on merit’ and not ‘on guidelines’ and asserts that it is not required to be a NPT-signed country to be a member of NSG.
At a Press Conference, External Affairs Ministry spokesman Vikas Swarup argued that France was a member of NSG while it was not a NPT nation and thus, China’s objection on India being a non-NPT nation is ambiguous.
But it is evident that the moves are in play and finer diplomacy is needed to advance respective national interest (China, India and the US), before any satisfactory conclusion could be reached.
However, many officials and diplomats argue that China should support India’s NSG application. India already has trade exemption which was granted in 2008 under George Bush government and allows India to engage in civil nuclear commerce. It also led to exchange of novel nuclear technologies between US and India.
China supported India in this endeavour albeit on the insistence of the then US president but it is strategically important that China does the same in Seoul too. China is widely viewed as a proliferator of nuclear technology as it has helped states such as North Korea and Pakistan in the past to gain access to nuclear technology for military purpose.
Supporting India would set a positive precedent for China for a membership of MTCR to which India was recently granted membership and China is not a member.
India and China have similar interest and voting pattern on pertinent economic policies such as climate funding and World Trade Organisation, and this is in accordance with Prime Minister Modi’s foreign policy, which is more focused on trade opportunities rather than geo-political associations.
This can present a unique opportunity for China to increase its trade commitments with India. Also, the US Congress recently rejected an amendment to grant India a special status as global strategic and defence partner, which exhibit a lack of dimension in India-US strategic cooperation and gives China a ‘wiggle-room’ to extend cooperation with India especially in trade and commerce.
Given the geographical location of India and China and a shared past, it is evident that they will be rivals but the recent allocation of approximately $300 million to Pakistan by the US to ‘fight terror’ implies that Pakistan is still a close ally of the US and it would be mutually beneficial for India and China to extend cooperation.
The recent missile and nuclear development of North Korea also poses a threat to the national security of China and thus is in need of new allies.
China is aware of the threat North Korea poses and thus backed the increase in United Nation sanctions after Pyongyang‘s missile test.
The common threat is in the form of Islamic State of Iraq and Syria (ISIS) and associated terrorism, making it more important for India and China to have some level of cooperation as both the countries are a part of ‘grand’ caliphate of ISIS. Thus, the change in global politics and economics have led to the evolution of many new factors which China need to contemplate before it decided to throw a wrench in India’s effort to gain NSG membership.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.