Bhutan’s announcement that it is unable to proceed with the Motor Vehicles Agreement with Bangladesh, India and Nepal is a road block, and not a dead end, for the regional sub-grouping India had planned for ease of access among the four countries.
The sub-grouping, BBIN as it is referred to, was an alternative mooted by the government after Pakistan rejected the MVA at the SAARC summit in Kathmandu in 2014. It seeks to allow trucks and other commercial vehicles to ply on one another’s highways to facilitate trade. Of the other SAARC members, Sri Lanka and the Maldives are not connected by land, and Afghanistan could only be connected if Pakistan was on board.
Down to just three countries now after Thimphu’s decision, India, Nepal and Bangladesh will have to decide whether to wait for Bhutan to reconsider or to press ahead with a truncated ‘BIN’ arrangement.
The first option will not be easy. The main concern expressed by Bhutanese citizen groups and politicians is over increased vehicular and air pollution in a country that prides itself on ecological consciousness. The upper house of parliament has refused to ratify the MVA that was originally signed by all four BBIN countries in 2015, and the official announcement indicates that Thimphu will not push the agreement ahead of elections in 2018.
Despite the setback, New Delhi must persevere with its efforts. To begin with, Bhutan’s objections are environmental, not political, and its government may well change its mind as time goes by. Dry runs have been conducted along the routes, and officials estimate the road links could end up circumventing circuitous shipping routes by up to 1,000 km.
Second, Bhutan’s concerns may be assuaged if India considers the inclusion of waterways and riverine channels as a less environmentally damaging substitute. Perhaps, Bhutan’s objections may even spur an overhaul of emission standards for trucks currently plying in India, Nepal and Bangladesh.
Above all, the BBIN pact denotes a “can-do” attitude on India’s part, as it shows a willingness to broaden its connectivity canvas with all countries willing to go ahead at present, leaving the door open for those that may opt to join in the future.
A similar initiative for the Asian Highway project under the BCIM (Bangladesh-China-India-Myanmar) corridor got a boost this week as the countries moved to upgrade the dialogue to the governmental level.
Although India has refused to attend China’s Belt and Road summit on May 14-15, objecting to projects in Pakistan-occupied Kashmir, the BCIM will remain a way of joining the network when India’s concerns are met. Connectivity is the new global currency for growth and prosperity as it secures both trade and energy lines for countries en route, and India must make the most of its geographic advantages.
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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.