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 | Cess-pool: Egregious move to raise resources Our Correspondent Many in the political class believe that the petroleum sector is an infinitely abundant source of funds. Cash-rich public sector undertakings (PSUs) in the sector are often used to promote politically-motivated projects; their money is siphoned off for various purposes; their dividends taken out to bridge the fiscal deficit; the prices of petroleum products are administered to suit political reasons; and different projects are financed by milking the sector. For instance, there is a cess on petrol and diesel, the proceeds of which are used to build roads. Now the Ministry of Urban Development wants this to be replicated for the improvement of infrastructure in urban areas. In fact, it has proposed an egregious, double-edged weapon to gore vehicle-owners: on the one hand, if approved and implemented, it would raise petrol prices by Re 1 per litre; and, on the other, it would also be levied on vehicle buyers, 8 per cent cess on the cost of a car and 4 per cent on two-wheelers. The Ministry's bosses believe that the public exchequer can get richer by about Rs 5,000 crore per annum if the cess is collected. The money can be used to fund Mass Rapid Transit System, bus-based rapid transit system, urban transport planning and enhance urban transport infrastructure in cities. The cess would end up increasing the price of a Maruti 800 by Rs 15,000 more. The Ministry wants the resources thus generated to be parked in a Dedicated Urban Transport Fund, which would be exclusively used to support transport projects like Metro networks in cities. It also argues that higher car and petrol prices would deter the use of personal vehicles. "The main objective is to reduce the use of personal vehicles. This is the main reason for keeping diesel out of the ambit of the cess," an official has been quoted in a newspaper. All arguments made by the Ministry are fallacious and unjust. For one, these intend to replace taxation with cess. Typically, a cess is imposed to provide some facility. But providing infrastructure is not a favour to citizens; it is the duty of government. In fact, even the cess for the purpose of making roads is unjustified. The government collects huge amounts in road tax from vehicle-owners; if needed, the rate of this tax should be increased, but a cess is not a proper way of building highways. Expanding the scope of cess would certainly be a retrograde measure; it would also be against the logic of economic reforms, which are about making public finance fair and reasonable. We hope the Cabinet dismisses the proposal of new cess. Posted on : 9/22/2007 Mail this article to your friend |