The state of the government’s finances leaves no real option but to go for second-generation reforms
By Prosenjit Datta, former editor of Business Today and Businessworld magazines
The daily rise in fuel prices makes the government seem both clueless and callous when crude oil is at a record low and consumers are battling job losses and income drops. But the truth is that the Finance Minister probably has no other choice. The government needs money desperately and irrational fuel pricing helps it in two ways. First, the higher excise and cess it has levied goes directly into its coffers. Equally, most of the extra money that oil marketing companies make by hiking prices daily will find its way into the government’s pocket through dividends and other means.
It is hardly a secret that the Finance Minister is in a dire situation, fiscally speaking. The former member of the Prime Minister’s Economic Advisory Council (PMEAC) Rathin Roy had pointed out over a year ago that the government was facing a silent fiscal crisis. Despite window dressing and brave claims, the government’s finances have been deteriorating for two years even before the Coronavirus pandemic hit it like a sledgehammer. Tax revenues have failed to keep up with the optimistic projections the Finance Minister makes while presenting her Budgets for two years now. https://www.prosaicview.com/hobsons-choice/
This article was first published by ProsaicView.