Sustainable fuel taxes

India needs a more transparent tax structure

Last week, the Union government reduced the excise duty on petrol by Rs 5 a litre and on diesel by Rs 10 a litre. This was timed to come into effect on Diwali, and was sold politically as a festival gift to the nation. The Union finance ministry argued it would boost consumption, aid diesel-using farms in the rabi season, and generally spur growth amid subdued demand. There were hopes that the spur to aggregate demand would in turn allow for a virtuous cycle in consumption, which would in turn increase fuel consumption and mitigate the effect of the cuts