One of the key mandates of NITI Aayog is to foster co-operative federalism through structured support initiatives. In this spirit, last year, the Prime Minister had constituted three sub-groups of Chief Ministers to advise the central government on Rationalization of Centrally Sponsored Schemes, Skill Development and Swachh Bharat Abhiyaan. This was a case of a reversal of the past approach whereby the erstwhile Planning Commission directed the states on how they should spend the funds provided by it. After deliberations and consultations with different stakeholders, all three sub-groups of Chief Ministers have submitted their reports. While some recommendations have been implemented, others are under consideration.
Taking cue from this process, NITI Aayog recently experimented with a new approach for facilitating the resolution of issues involving states and central ministries. For most projects that states implement, there are permissions and clearances that they must obtain from central ministries. Many times, the process of granting these permissions and clearances get tied up into one or the other bureaucratic hurdle. Poor communication can sometimes lead to unnecessary delay for long periods of time. Bringing the two sides together on a single platform can help resolve these matters swiftly and to the satisfaction of all involved.
Recognizing this problem, NITI Aayog recently took the initiative to seek resolution of several pending issues of the State of Telangana with seven different central ministries. Initially, there were discussions between the State of Telangana government and the Aayog that led to the identification of some 20 issues on which the former needed answers, clearances or permissions from the central ministries. The Aayog first sent a note flagging these issues to the officials in the ministries at the appropriate levels in advance and then with mutual consent called a meeting of the senior state and central government officials under the chairmanship of its Vice Chairman. This process ensured that officials from both Central Ministries and the State Government came prepared.
The 20 issues were spread across ministries of Coal; Petroleum and Natural Gas; Power; Environment, Forests and Climate Change; Culture; Finance and Rural Development. With the benefit of senior officials of all ministries present, each issue could be discussed face-to-face between senior officials of the Government of Telangana and the relevant ministry officials. To the great satisfaction of both sides, one by one, all issues were either resolved or brought much closer to resolution. Some of these issues had been pending for more than six months. The best aspect of the process was that both sides discussed matters in good faith yielding ground where it was warranted and explaining satisfactorily when the outcome desired by the other side was not feasible. The entire meeting took less than two hours and required nudging by the Vice Chairman, NITI Aayog in only a few instances.
Three examples give the flavor of the nature of the issues facing Telangana and outcomes achieved. In implementing the rural housing scheme, Telangana has developed its own online beneficiary payment system that captures information on additional loans taken by beneficiaries and materials such as cement supplied to them. These features are not captured in AwaasSoft, the newly introduced payment system of the Ministry of Rural Development. The state has had difficulty in getting clarity on whether and how it could use its own system without putting the central government requirements in jeopardy. Upon discussion, a solution was found with the Ministry of Rural Development agreeing to Telangana using its own software for disbursement of benefits as long as it fed the relevant data into the national portal through web-server.
The second example concerned the applications by Telangana for allocations of natural gas for its Karimnagar and Shankarpally gas based power projects submitted to Government of India in November 2010 and April 2011, respectively. But the issue remained unresolved. Discussions resulted in the Ministry of Petroleum & Natural Gas informing the state officials that domestic production of natural gas fell far short of the demand. But luckily the price of imported gas had dropped by a wide margin recently and the State Government could import gas from using the existing infrastructure of Government of India. This was acceptable to Telangana officials and the matter was resolved.
The final example involves Bhadradri Thermal Power Project. The Government of Telangana had requested the Ministry of Power in August 2015 to accord approval for establishing 4×270 MW coal based thermal power project with subcritical technology. The Ministry of Power responded that it had adopted the policy of denying permissions to plants with subcritical technology during the 13th Five Year Plan. The state of Telangana argued that they were entitled to clearance of the project because they would complete the project within the 12th Five Year Plan. While NITI Aayog supported the state’s position, the Ministry of Power stood ground that it had already been denying permission to all subcritical plants. The impasse was, however, resolved when the official from the Ministry of Environment, Forests and Climate Change stated that even if the Ministry of Power granted permission on the ground that the project would be completed before the 13th Plan, environmental clearance will not be given. The official advised the State to adopt supercritical technology to ensure that the necessary environmental clearance would be granted. The matter was thus resolved.
These examples illustrate the unnecessary delays can happen on account of very simple problems that can be readily resolved if the two sides come together at a single platform to speak face-to-face in good faith. The role of NITI Aayog was to make this happen. There are, of course, symmetrical problems that central government projects face in the states and there is scope for taking up those as well at forums such as this one. NITI Aayog stands ready to serve as the forum for similar future consultations to resolve two-way issues between other states and the central ministries. It makes no sense to delay projects on account of matters that are easily resolved by coming together face-to-face.
Thus completing the circle of co-operative federalism complete,in its true sense.
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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.