In a much-anticipated move in the country, the Indian government increased the excise duty on petrol and diesel by Rs 2 per litre. While the move, though perhaps anticipated in view of the volatile world oil prices, has sent shivers down people’s spines at the prospect of an increase in fuel station prices. The government has made a statement, however, that the hike will not directly affect consumers at the pump, which is in a way more comforting, particularly in the wake of the Noida tragedy and recent stock market crash.
Why is the Government Raising Excise Duty
The increase in excise duty is part of the larger economic game plan of the government to raise more revenues, especially against the background of deep fiscal requirements. Excise duties as duty on items like petroleum products are a major source of revenue for the central government. As crude oil prices around the world vary erratically due to a variety of geopolitical reasons, the government has been working very hard to balance its budget and maintain economic growth.
With oil prices remaining volatile, this hike in excise duty will serve to offset some of the crude oil’s high import bills, while generating a steady source of revenue in the process. While there is a hike in duty, the government has been careful to keep the consumer from bearing the bulk of this added cost, an assurance that has left many a consumer breathing easier.
How Consumers Will Be Impacted
The biggest concern for consumers is how it will impact fuel prices. With fuel prices already at records, any rise in duties would make pump prices go up. But with the government’s guarantee that consumers would not need to bear the extra cost of higher prices, fingers are being raised. It is expected that the hike in excise duty will be balanced by the government by adjusting other taxes in such a manner that the fuel price will not be impacted.
This step is most important in the context of the entire economy, like the unfortunate Noida tragedy, when a series of accidents resulted in overall panic and restlessness. Most individuals were already suffering under financial crisis due to rising cost of living, and the step taken by the government towards the regulation of fuel prices has been viewed as a crucial step so that no further agony of the common man could be inflicted.
The Noida Tragic Incident and Its Consequences
The recent unfortunate incident in Noida, when there was a brutal and senseless crime, shocked the whole nation to its core. That this incident took place in a highly populated urban area was a reminder to the nation about the precarious socio-political environment of some sections of the nation. Though Noida disaster itself is unconnected to petrol prices in itself, it lies nicely in line with the overall scenario of all the other negatives which the government is working conscientiously hard to put right.
After the incidents, there has also been increased concern on the part of the public regarding safety, law enforcement, and social unrest. Imposing a raise in excise tax and assuring not to raise fuel prices is done at a time when people are already under added emotions and vulnerabilities. For others, the government’s prompt and clear message that fuel prices will not be increased is a source of stability in what could have otherwise been an unstable outcome.
Stock Market Crash and Economic Disturbances
The second cause of fear for the increase in excise duty is the recent stock market crash. The stock market, a barometer of the economy of the nation, has recently seen unprecedented levels of volatility. With the markets taking steep drops, investors have been seeing their portfolios shrink. These are moments of economic stress and the worst times when the consumer can be made to face any extra cost burden.
As people gear up for the effect of the news of the stock market crash, they fear the government will tackle fiscal problems without putting additional pressure on the middle class. The assurance that excise duty imposed on diesel and petrol will not result in high fuel prices is a sign the government is trying to cushion negative effects on consumers while tackling more universal economic challenges.
Effect on Businesses and Logistics
While consumers might not actually feel the sting at the gas station, companies, especially those with a transport and logistics component, can still take the pinch. Any increase in fuel taxes can translate into higher operating costs for companies that use a lot of fuel in their businesses. This can then translate into higher prices for goods and services, which can, in turn, impact consumers indirectly.
The logistics industry, already reeling from the aftermath of the crash in the stock market and overall economic slump all over the world, may not be able to absorb these additional costs. However, companies will try to buffer the impact through planning and effectiveness. The governmental move to reconcile fiscal needs and consumer protection can result in companies going about business as usual with minimal disruption.
The Road Ahead
The excise duty hike on petrol and diesel is a multifaceted issue with economic policy, consumer interest, and national stability. While the government assurances are reassuring, it will be interesting to watch over the next few weeks to observe what occurs in the market.
The Noida tragedy and the crash of the stock market live updates have filled people with uncertainty, and it is even more important that the government offer a stable and predictable economic situation. Being the hope-giving agency since the people have faith in it during times of troubles for guidance, what has been done to prevent an increase in fuel prices can prove to be a stabilizing element of great significance.
Lastly, while the increase in excise duty on petrol and diesel may appear ominous at first glance, the assurance by the government that consumers won’t have to shell out extra is a silver lining. Stacked on top of the nation’s tensions was the Noida tragedy and the decline in the share market, so no doubt can exist that the government is attempting to insulate the common man from further financial pressures. Whether this scheme succeeds or not will depend upon the overall state of the economy in the coming couple of months.
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