Petrol tax cut in Goa: Parrikar converts the Utopian into reality

The petrol tax cut in Goa, far from being a populist measure, is a brilliant move to plug revenue leakage caused by smuggling petrol into Goa and by adulteration of petrol with kerosene; and the first step to improving transport services.

Let us assume that somebody in your apartment block is stealing electricity from your meter. What do you do? Do you get your family to work harder to pay the bill, while letting the theft increase? Or do you stop the theft and then pass the benefits on to your family?

Government budgets are much like this. The more they steal from us, the higher the taxes go. That was the assumed logic, till Manohar Parrikar came along in Goa and turned things on their heads by opting to stop the theft.

This is the simplest way to explain the cutback in state taxes on petrol in Goa to disbelieving friends and family members. But we get ahead of our story.
Look carefully at the Goa state budget. Once you’ve swallowed the grand surprise of the almost 20% drop in petrol prices, you can start looking at the other interesting and game-changing aspects. Here is a one link to the main points:
The mainstream media is making out the reduction in state taxes on petrol to be some sort of populist measure. But it really goes much deeper: it has to do with the larger issue of energy security, tax evasion, fossil fuel smuggling and blocking revenue losses. At the same time, it works towards larger social benefits in a state where every segment of society depends on two-wheelers which consume petrol. Please also try to understand which coterie controls the liquid fuel business in and around the west coast of India, particularly the Konkan area.
To put matters into better perspective, we have to fully accept that a large percentage of the petrol sold in India is adulterated with kerosene. Add the unspoken truth that petrol is being smuggled into retail outlets especially in and around the west coast of India through two major routes—by ship to shore through smaller barges; and by diversion from domestic refineries.
Given this state of affairs, the tax collected on the end product at the retail outlets was simply not reaching the Governments. Do the math—if even half the petrol sold by a filling station was “off the books” because it was adulterated or smuggled and the tax was still collected from the consumer, that pretty much explains why petrol pump dealers who never tire of complaining about low commissions will not simply shut shop and change their line of business.
By one estimate, about twice as much “grey market petrol” was sold from filling stations in and around the coastal areas of the Konkan belt than “legit petrol”; the tax collected on the whole amount went into the coffers of the fuel mafia.
How much better does it get? Collect tax from consumers and don’t pass it on to the government. Whether it was the small operator selling ‘petrol’ on the roadside by the bottle, or by barrels moved on bullock carts or small trucks, or the politically connected dealer, it was a total scam. With one swift move, the Parrikar government destroyed that scam and then got into the business of plugging other leakages in the system.
Hidden in the same budget proposals are other small nuggets which have already become game changers. Some examples:

  • A hefty increase in the price of bottled soft drinks and packaged fast foods. By one account, the idea is to pass this cost increase on to the tourists and the rich, which is fair enough. By another account, however, the idea is to try to equalise the price of a litre of soft drinks with that of a litre of petrol, and recover the lost taxes from the consumers of soft drinks. Brilliant. Hopefully this will also reduce public spending on health care for diseases like obesity and diabetes.
  • It gets even better. Plastic packaging is to be withdrawn and that includes what’s being used for soft drinks as well as chips. These will need to be sold in glass bottles and paper packaging if they want to escape yet higher taxes; also there is a refundable deposit on every plastic package sold—water, soft drinks, chips, bread, processed foods, whatever. Now the plastic lying around all over the country will suddenly have a reimbursable value in Goa.
  •  Simultaneously, there is a boost for the local small-scale bakery and soft drink industry, which has almost vanished even in

Goa, the mother-lode Goa. Selling fresh and to a local clientele, the concept of reusable bottles and paper or other bio-degradable packaging gives them a chance to come back.

Those of us who knew Goa in the seventies and earlier will understand better what this means in terms of reviving local businesses. It was becoming difficult to score a decent “poi” lately, and of the cottage level soft-drink industry, there was not a trace.

  • Let us move on to yet another interesting step—a minimum support price of Rs8 for fresh tender coconut and a total removal on any sort of restriction on its sale—obviously, with paper straws, not plastic. A large business house in Goa, by the way, is already well on its way to providing paper straws at very cheap rates to sellers of coconut water, so that this element of plastic is also done away with. One looks forward to this healthy refresher at Rs 10 to Rs 15 rupees a coconut.
  • Goa has a strong taxi and motorcycle pilot lobby and fairly ancient public transport. The concept of decent city buses appears to meet with resistance from local transport unions. So what did Mr Parrikar do?

He organised huge subsidies for local people using buses, subsidised travel by bus for religious centres, and has also been generous in handing out permits for taxis which cost Rs14 a kilometre. And now, with petrol down by 20%, these will hopefully all come together, along with buses brought in under JNNURM, to give Goa the public transport it is missing.
The list goes on. Much of it is not understood by people sitting in their ivory towers in faraway cities. But there is a common theme throughout—identify the leakage and the theft, block it, use some amount of perception managing skills to sell the solution, and thereby reduce taxes. This is not Utopian. This is being done and can be done on an all-India scale if the powers that be choose to. Just the sections on public transport initiatives in Goa, for example, are a pleasure to analyse.
Taking this forward on a national level appears to be a logical next step; and not just for reducing state taxes on petrol elsewhere, but also plugging leakages and reducing theft.

The question is—who will bell the cat, especially the one wearing plastic and selling soft drinks as well as packaged fast food?

(Veeresh Malik had a long career in the Merchant Navy, which he left in 1983. He has qualifications in ship-broking and chartering, loves to travel, and has been in print and electronic media for over two decades. After starting and selling a couple of companies, is now back to his first love—writing.)

1 decade ago
Author's note:- A very prominent citizen of Goa wrote in asking for some clarifications, and here is my response, logically amended to shield identities:-

""Most certainly petrol is adulterated with kerosene, as well as other cheaper refined fuels like naphtha and even some locally produced brews, all of which are put together by the generic term "solvent". What is this "solvent" composed of? I wish I could share manufacturer and/or oil company research lab data and/or whistleblower data on the subject with you, but regret I can not - but certainly what we call "SKO" or "Superior kerosene" is a major component of this "solvent". And you are correct, the adulteration of diesel with kerosene is a fact, too.

Will new modern generation petrol cars sustain this adulteration? Put it this way, please, certainly the car will not come to a halt, but it will be sluggish, "throw oil", provide engine knocking - apart from frequent cleaning of nozzles, regularly advising customers to use additives and reduced mean time between overhauls. .

2) Being an ex-seafarer myself, I do know what fuels ships use, and apologise if what I wrote was not articulated well enough. I am not referring to syphoning out of bunkers, please, or any other such hanky-panky.

What I am talking about is proper "dhanda" of small to midsize tankers, in the 5-20k dwt size, sailing out of loading areas in the PG with cargoes of what we call "MS" or motor-spirit, and offloading into smaller barges/boats off the West Coast of India, from where the MS enters the retail supply chain.

Again, regret, my sources are not open for scrutiny, but having worked on tankers myself in India and the PG and the rest of the world, and with a wide network of friends, please accept what I say - grey market trade in shiploads of any commodity is not such a strange or new phenomenon.

That this is attracting central government attention on energy security aspects is also a fact.""


1 decade ago
I wish similar activities are rubbed on to other states which is governed by non congress alliances. I doubt a congress ruled state will ever see this kind of budget .
Vinay Isloorkar
1 decade ago

Manohar is an IITian by his DNA. What we see on dispaly is sensitivity analysis and a holistic approach. Sooner or later, if meritocracy creeps into politics, well as it should, we hope Manohar will be able to show his talent on the larger national canvas! Imagine him working in tandem with Narendra Modi. This country has hope. Lots of it!
Replied to Vinay Isloorkar comment 1 decade ago
You have a valid point, Vinay ji, and thanks for writing in.

1 decade ago
Manohar Parrikar an IITan came pretty close to getting the BJP presidentship ,Hes smart has a clean image but what undid him that time was his big mouth He famously said Advani was a RANCID PICKLE ................whichis funny and partly true but which destroyed what ever little chance he had of getting to the National level ..........its the BJPs loss as I feel he would have made a better President then Fat boy
Replied to Raj comment 1 decade ago
Yes, Raj ji, thank you for writing in - and to take the pun further - the memory of the pickle is still fresh in Delhi!!

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