Background :-
The United Nations conference on climate change now under way in Marrakech, Morocco, has the ambitious task of drawing up the first steps on enhanced finance and technology transfer, which is vital to advance the Paris Agreement that entered into force on November 4.
India at Marrakech:-
India’s negotiating positions at the ongoing Conference of the Parties 22 (CoP 22) must ensure that on both these aspects, the basic principle of equity and common but differentiated responsibilities laid down by the UN Framework Convention on Climate Change are upheld.
Mitigating greenhouse gas emissions is central to the effort to contain the rise of the global average temperature in the current century to well below 2° Celsius since pre-industrial levels.
But that goal is considered impossible even if sincere action is taken on all pledges made so far, necessitating a higher ambition.
Moreover, the Paris Agreement does not have a carbon budget system that gives weightage to the emerging economies taking their historical handicap into account.
The imperative therefore is to demand suitably high financial flows to both mitigate emissions and prepare communities to adapt to climate change. Such a mandate should be seen as an opportunity, since CoP 22 will discuss ways and means for countries to integrate their national commitments submitted for the Paris deal into actual policies and investment plans.
In India’s case, new developments in sectors such as construction, transport, energy production, waste and water management, as well as agriculture, can benefit from fresh funding and technology.
Adopting green technologies in power generation, which has a lock-in effect lasting decades, and other areas like transport with immediate impacts such as reduced air pollution has a twin advantage.The local environment is cleaned up, improving the quality of life, and carbon emissions are cut.
It is imperative therefore that the national position raises pressure on rich countries for technological and funding assistance under the Paris Agreement.
In parallel, India would have to update its preparedness to meet the new regime of transparency that is to be launched under the climate pact. The preparatory decisions to write the rules and modalities for such a framework, and assist developing countries with capability building will be taken at Marrakech.
There is some apprehension that the U.S. could exit the climate consensus since the President-elect, Donald Trump, has vowed to cancel the Paris Agreement. Yet, business and industry today see a strong case to take a new path, as energy costs favour renewable sources over fossil fuels. States and cities are also charting their own course to curb emissions. These are encouraging trends.
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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.