Rizwanudeen, a 37-year-old laborer who delivers food to the southern Indian city of Chennai, struggles to pay his rent and installments at the end of each month as he has been hit by the double whammy of rising fuel prices and declining food orders. .
Millions of weekly workers like Rizwanudeen who make a living transporting goods or people across India have been hit hard by record fuel prices which are among the highest in Asia, rising by a third in in the 15 months since the coronavirus first hit the country. .
The average cost of a liter of gasoline in Mumbai has passed 100 rupees ($ 1.37) this month, 50-70% more than in Bangkok, Hanoi and Manila. State and federal taxes, which have doubled since Prime Minister Narendra Modi took office in 2014, account for more than 60% of the retail price of fuel in India.
As the federal government faces rising health care costs related to its ongoing battle against COVID-19 and pledged to sweeping farm and other subsidies, a finance ministry official said it there was little room for a significant tax cut that could ease the pain of low incomes.
“I was spending 1,500 rupees ($ 20.58) per week on gasoline before the pandemic, now I am spending 2,000 rupees. I am already earning less due to fewer orders due to blockages,” Rizwanudeen lamented, saying that a third of its income was spent on fuel. .
For an Indian earning the national average wage, a liter of gasoline would represent a quarter of his daily income, according to Reuters calculations.
Federal government fuel tax revenue increased 80% to 2.550 billion rupees over six years ending in 2019/20, said PTR Palanivel Thiagarajan, the state finance minister of Tamil Nadu, in the south of the country, at a meeting on taxes in May.
But tax revenue shared with states declined by more than Rs 200 billion during this period, he added, echoing a common criticism among state officials over tax allowances on the government. fuel.
With total federal tax revenues hit by the industrial slowdown caused by coronavirus-induced lockdowns, New Delhi has been reluctant to cut fuel taxes, even after oil prices collapsed to multi-year lows the year last.
State officials, who have faced soaring health care costs this year due to the pandemic, have blamed federal levies for the higher prices.
The federal government in turn said it would only cut taxes if state-level taxes were reduced.
Despite the deadlock on who should go first to lower tax rates, the country’s central bank governor Shaktikanta Das admitted last week that soaring fuel prices posed a threat to the economy. in general and required coordinated action by central and state governments. Read more
His warnings came after India’s wholesale price index (INWPI = ECI) jumped 10.49% year-on-year in April.
Other significant cost increases are underway. Truck rental rates, which deliver everything from perishable goods to machine parts in India, could rise 10% this month due to rising fuel costs, said SP Singh, senior researcher at the Foundation. Indian transport research and training.
“In May, rentals fell as truckers struggling with monthly vehicle payments absorbed fuel prices in the absence of activity. Now, as closures ease, rates go downhill. freight are firming up, ”Singh said.
RBI Governor Das also said that while federal and state governments may be inclined to tackle high fuel prices, their options may be limited by their already shattered budgets.
For Selva Murugan, a 35-year-old former driver from around Chennai for the Ola auto service, the damage has already been done.
“I was able to pay my loans when diesel cost around 65 rupees per liter. After that I started to feel the creak and by the time it hit 75 rupees I decided to sell my car, ”Murugan said.
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