Indian Economy News & Discussion - Nov 27 2017

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kit
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby kit » 13 Sep 2018 02:59

Does India have shale oil deposits ? ..At this rate where oil prices go north maybe it will become feasible at some point !!

"even though India is lagging behind the major oil producers when it comes to conventional oil reserves, it has a huge potential in shale oil. A few years ago, the ONGC, India’s largest exploration group (according to revenues), hailed the shale gas discovery as Asia’s first. It said that it had been encouraged to explore shale oil possibilities in the basins of the Cambay, Krishna-Godavari, Cauvery and the Assam-Arakan basins as well."


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby manju » 13 Sep 2018 16:07

Supratik wrote:Also it is not a matter of spending Rs 2000 in a restaurant. High diesel taxes make the entire transportation industry less competitive which in turn makes manufacturing and some services less competitive. No wonder we have one of the highest transportation costs in the world.

Yes, Mudra and farming loans are risky but with wide distribution it is somewhat mitigated. Compare an industrialist getting Rs 10000 crore and his company tanking to the same loan being given to 50000 people of which 2000 are tanking. Then it is less risky. I believe the repayment on Mudra is good and stable. As for farming it is generally money down the drain as farming in India will remain uncompetitive till the 40% labor force in farming is reduced to less than 10%. Until then govts will give them money to get votes irrespective of which political party.


One of the main (and probably not many other conditions) conditions to get MUDARA loan is that they should not have defaulted on loan repayment.

It is unlikely that people will get a second loan until they start paying the first loan.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pankajs » 13 Sep 2018 16:14

Elara Capital - Parivartan - Capturing Change - 2018


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 13 Sep 2018 16:55




There is already a gathering momentum by "locals" against extraction of shale gas/oil led and funded by the backers of urban naxals and FFNGOs which has led to opposition by communities.

A very similar line was followed in the kudankulam nuke protests with the very same "leadership" and similar modus operandi. MMS was proven very right about the "foreign backers" to these protests, a view he articulated publicly.

A uranium mine somewhere in the NE, assam I think, is also being similarly targeted and willfully blocked by "secular" locals.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vera_k » 13 Sep 2018 20:02

Trikaal wrote:So can't US increase output even more and cause prices to crash? I think an oil price crash will be in US interest because as long as oil prices stay high, no amount of sanctions will trouble Russia in the least.


Extracting more oil will happen if it makes economic sense. There are no PSU type entities available that could be forced to produce more output just because.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 13 Sep 2018 20:29

vera_k wrote:
Trikaal wrote:So can't US increase output even more and cause prices to crash? I think an oil price crash will be in US interest because as long as oil prices stay high, no amount of sanctions will trouble Russia in the least.


Extracting more oil will happen if it makes economic sense. There are no PSU type entities available that could be forced to produce more output just because.


Reliance had invested in some shale companies in the US.

They should have some expertise in the process.

If anyone is ready to go in quickly, they may be the ones to do it.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 13 Sep 2018 20:42

Okalhoma has lot of shale drilling.

https://www.newsweek.com/oil-gas-drilli ... kes-774354
OIL AND GAS DRILLING PUTS OKLAHOMA'S SURVIVAL AT RISK BY CAUSING MASSIVE EARTHQUAKES

In Oklahoma, which has had an increase in fracking wells since 2009, earthquakes have surged in recent years. Magnitude three or higher earthquakes were once a rarity in the state, with one per year before 2011. In 2015, there were over 900. "It is a phenomenal thing that has occurred," Pollyea told Newsweek. The state is now the most seismically active in the lower 48, which is concerning, considering the state doesn't have extensive infrastructure that can handle the shakes.

Fracking isn’t directly causing these earthquakes, said Pollyea. But recent technological advances are allowing companies to grab oil and gas from previously inaccessible reservoirs—resulting in even more wastewater that needs somewhere to go. And in Oklahoma, saltwater injection “is causing nearly all of these earthquakes,” said Justin Rubinstein, a seismologist with the U.S. Geological Survey who was not involved in the study.

In an effort to stop this disturbing trend, Oklahoma Governor Mary Fallin signed a law in April 2016 that gave the Oklahoma Corporation Commission the authority to reduce the amount of saltwater being injected back into the ground—a direct effort to curb the earthquakes.

The Problem Persists

Pollyea and colleagues wanted to better understand the connections between earthquakes and saltwater disposal. To do so, they focused on the Arbuckle group, a porous geologic formation where saltwater disposal is common. They compared the locations of earthquake centers with saltwater disposal wells.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Philip » 14 Sep 2018 12:22

Media today, ONGC looking at investing in new Ru O&G finds.Has already invested in the Sakhalin-1 project and is looking for more opportunities.With limitations in India, we will have to take our investments abroad in stable friendly countries and buy oil from where its cheapest.
Venezuela has offered us cut price oil, we should explore such offers asap.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 14 Sep 2018 21:29

chetak wrote:
vera_k wrote:
Extracting more oil will happen if it makes economic sense. There are no PSU type entities available that could be forced to produce more output just because.


Reliance had invested in some shale companies in the US.

They should have some expertise in the process.

If anyone is ready to go in quickly, they may be the ones to do it.


They quit. Sold all their stake when the oil prices fell sharply.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 14 Sep 2018 22:18

hanumadu wrote:
chetak wrote:
Reliance had invested in some shale companies in the US.

They should have some expertise in the process.

If anyone is ready to go in quickly, they may be the ones to do it.


They quit. Sold all their stake when the oil prices fell sharply.


Thanks, sirji.

Missed that one.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 14 Sep 2018 22:56

Headwinds in the economy with rising oil prices and depreciating rupee. Govt has started intervening. I expect RBI to raise rates and more fiscal tightening.

https://economictimes.indiatimes.com/ne ... 813486.cms

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 14 Sep 2018 23:34

Deleted
Last edited by Suraj on 17 Sep 2018 21:56, edited 1 time in total.
Reason: NO twitter rumors

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Mort Walker » 17 Sep 2018 10:27

Forget Lehman Brothers, India is still in a financial crisis

It appears RR is running for political office.

The banking system’s overhang of bad loans is another full-blown crisis in India that stymies growth and shows no signs of an early resolution. Popularly referred to as non-performing assets, or NPAs, these are loans for which borrowers have stopped repaying (or are unable to pay) interest and principal. The corpus of bad loans just keeps growing and is proving to be a drag on economic growth. It is acting as a constraint on fresh loans not just for the large corporates but also for the crucial small and medium sector which forms the economy’s backbone.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Mort Walker » 17 Sep 2018 10:29

Deleted
Last edited by Suraj on 17 Sep 2018 21:56, edited 1 time in total.
Reason: NO twitter rumors

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 17 Sep 2018 11:10

Deleted
Last edited by Suraj on 17 Sep 2018 21:56, edited 1 time in total.
Reason: NO twitter rumors

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vikas » 17 Sep 2018 12:52

How do states get the Oil. Is there any fixed quote or do the Oil companies decide how much each state will get ?
What stop s a state to slash tax on oil meant for internal consumption and sell to other states at a higher tax rate.

e.g: 15% for state and 20% for out of state sale like they do for milk packets

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 17 Sep 2018 13:26

Vikas wrote:How do states get the Oil. Is there any fixed quote or do the Oil companies decide how much each state will get ?
What stop s a state to slash tax on oil meant for internal consumption and sell to other states at a higher tax rate.

e.g: 15% for state and 20% for out of state sale like they do for milk packets


each state gets the oil that it can sell, plus a cushion to manage the vagaries of the supply chain. oil marketing companies (generally PSUs) are the source.

No state imports or can import directly.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 17 Sep 2018 19:37

Petroluem under GST is a bad idea. The 28% rate is too low. The typically rich countries in Europe with extensive social security systems have around 50-60% tax. Indians expect everything to be free. A hark back to socialism. Someone has to pay for all the social security that this govt is bringing. Having said that the problem in India is it is not 50-60% tax but bloody more than 100%. This doesn't make economic sense and is a pending reform becoz this comes from the Congress-Left days when petroleum was considered a luxury. People will be happy if you tax it at 50-60%. They are not asking for GST which is not economically viable.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 17 Sep 2018 19:38


Gus
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Gus » 17 Sep 2018 20:48

are things under GST still susceptible to cess?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby isubodh » 17 Sep 2018 20:58

Gus wrote:are things under GST still susceptible to cess?

there are already items with highest GST + cess e.g tobacco products

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby isubodh » 17 Sep 2018 21:07

Vikas wrote:Any Govt (central or state) can slash tax on oil bill but how would they recover the loss in revenue, no one talks about it.


Shouldn't Govt look at reducing its costs ? If it were to simply pass on all the cost to its subjects then where is the challenge. (except for maybe if it were to grind the whole economy to a halt)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pankajs » 17 Sep 2018 21:29

How will changing crude derivatives price reduce GOI's cost?

BTW, the same argument about rising petro cost could also be applied to rising interest cost. That too would slow the economy.

One just has to follow Turkey's saga for the past 6 months to understand the impacts of such policy.

Was it yesterdin that Turkey has to Jack up its interest rate by some 6.5%?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 17 Sep 2018 21:38

They can reduce it by one rupee every three months to bring it to a reasonable level. Both high petroleum prices and falling rupee are inflationary. So expect RBI to hike rates.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 17 Sep 2018 21:55

The lions share of the taxes on petrol are STATE taxes, not central ones, and the state-imposed rate varies significantly from state to state. It's the states that do not want a fixed tax rate on petrol across states - which will of course be pushed down to the lower level possible nationwide.

Note to ALL posters:
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This isn't a place for rumor mongering.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 17 Sep 2018 21:57

Supratik wrote:What is the point of naming it GST then?

GST- Goods and Services Tax. It's doing what it is named. Nowhere in the name implies that there can't be new tax brackets. The aim is to make sure a particular product is charged same tax rate throughout the country to effectively create a single market. It doesn't envision to make tax for every item same, that is simply unviable.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 17 Sep 2018 22:34

It isn't a question of GST being unable to have more slabs. Different states tax petrol at different rates. The reason petrol (and other sin taxes like alcohol) were hard to subsume into GST is that some states depend on high taxation of those items a lot more than others do, and were opposed to a single unified national rate - whatever that rate is - set by the GST council.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 17 Sep 2018 22:54

Here is how the govt is tackling the NPA mess it inherited.

https://economictimes.indiatimes.com/in ... 845118.cms

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Austin » 18 Sep 2018 11:05

The Spectator Index
‏ @spectatorindex
14h14 hours ago

GDP (PPP) per capita growth, past five years.

India: 45%
China: 45%
Bangladesh: 45%
Indonesia: 29%
Turkey: 27%
Pakistan: 24%
S Korea: 22%
Egypt: 18%
US: 17%
Germany: 15%
UK: 15%
Canada: 13%
Japan: 13%
France: 12%
Italy: 12%
Saudi: 9%
Russia: 9%
Nigeria: 4%
Brazil: -1.2%

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby kiranA » 18 Sep 2018 21:42

Suraj wrote:The lions share of the taxes on petrol are STATE taxes, not central ones, and the state-imposed rate varies significantly from state to state. It's the states that do not want a fixed tax rate on petrol across states - which will of course be pushed down to the lower level possible nationwide.

Note to ALL posters:
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This isn't a place for rumor mongering.


The lions share part is simply no longer true . It was true in 2013 but right now the lions share is charged by center . The following figure nicely captures about how taxes go for Delhi .

Image

Website https://factly.in/taxes-on-petrol-and-diesel/. There is another nice picture which shows taxation dramatically changed from 2013 to 2018 between states and center . In 2013 it was indeed states taxing higher . But picture is completely different now in most states.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Gus » 18 Sep 2018 21:51

a portion of central excise goes to states as well. :roll:

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 18 Sep 2018 22:06

What is 'State VAT' above ? There are almost 30 states. Which one are they talking about ? Every single state has its own rate. In fact PPAC (the source for the above figure) has a spreadsheet on it:
State petroleum tax rates (Excel)
The problem here is that the central rate is reported as a Rupee value. It stays fixed until the center announces a change. States amounts are a percentage, dependent on the current price. That Rs.16.28 above is based on petrol price in May, and not September. The central figure is unchanged, but the state figure is not.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 18 Sep 2018 22:39

There is no use in fighting whether it is central or state tax. More than 100% tax is not a feasible option. Taxes have to come down. As suggested above they can transfer it to a new GST slab and gradually bring it down to 50-60% tax. But states have to agree which they are not.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 18 Sep 2018 23:16

I'll point this out again - the center's tax is a fixed rupee amount per liter - Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. With the current price of petrol, the center's share is still Rs.19.48 - the rest is the remaining three variables.

The center's share does not change when prices fluctuate. It's the state's share that does - the states charge a percentage, and therefore their Rupee share of taxes go up and down depending on spot prices.

The Center is also responsible for compensating states for loss in revenue on account of GST being implemented. That money comes out of this pool of revenues. Claims of center "pocketing money" are absurd. They are the backstop here.

The center could cut their share by say Rs.2-4. But there's no guarantee prices will fall, simply because states set their own rates autonomously - when their receipts from center fall as a result, they will simply increase their rates to compensate. The only way around is a nationally agreed upon GST rate. "Center should cut their rate and prices will go down" is much too simplistic here.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Gus » 19 Sep 2018 00:49

States are playing a game where they try to force central govt to reduce prices, and States can still increase VAT and let central govt (read Modi) take all the blame for the price rise.

Once you give in to this nonsense, then it is impossible to reverse.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby guru.shetty » 19 Sep 2018 02:00

High prices of petrol/Diesel clearly have a political cost. But reducing the taxes means that no money for social programs (or freebies) which too have a political cost. If you ignore that for a bit, one could argue that India needs higher fuel prices for the following reasons.


1. Out of the 20 most polluted cities in the world, 14 of them are in India [1].

2. Even though the country’s economy has grown by ~7% a year, its fuel consumption has only increased by 0.5% [2]. So one could argue that the economy has gotten more efficient.

3. Indian cities are choked with traffic snarls. Higher fuel prices will eventually lead to more public transport utilization. And probably construction of more metros. [3]

4. At Rs 100/litre, a person driving a typical car for 50 km/day will end up spending around Rs8000/month (or Rs 96,000 a year). Electricity costs for a electric car for the same distance would be around Rs 10000 a year. This suddenly makes economics of expensive electric cycles/scooters/cars/rickshaws/taxis very attractive. This is a nice way of cross-subsidization. [4]

5. Higher fuel costs have finally led to cabinet agreeing to Piyush Goyal’s 2 year old proposal of 100% Indian railway electrification. [5]

The biggest bane of Indian economy is the CAD caused by high crude imports. Taxing that heavily could potentially let India to rapidly kill the problem. May be the current high fuel prices act will act as a nice segway for electrification of India’s road transportation.



[1]: https://www.thehindu.com/sci-tech/energ ... 745178.ece
[2]: https://www.livemint.com/Industry/KUEOL ... ugust.html
[3] https://www.livemint.com/Opinion/K0y5UV ... sport.html
[4]: https://www.businesstoday.in/sectors/au ... 77542.html
[5]: https://www.livemint.com/Companies/jD73 ... 02122.html

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 19 Sep 2018 04:33

Gus wrote:States are playing a game where they try to force central govt to reduce prices, and States can still increase VAT and let central govt (read Modi) take all the blame for the price rise.

Once you give in to this nonsense, then it is impossible to reverse.

I don't want anyone to go into the politics here, but yes, that's how the economics work. The price to consumer will not fall much because prevailing crude prices are what they are, and the fiscal arrangements being what they are, a certain level of funds transfer from centre to states is expected, failing which the states will simply raise their own rates. Alternatively, one can keep prices down by holding down the prices that OMCs can charge the dealers, in which case the losses will mount at ONGC etc, as it did in the late 2000s through early-mid 2010s.

There is no free lunch here. GoI is doing what it can to curtail the import bill - *volume* of oil imports has grown much more slowly in recent years:
India import volume of crude oil

Code: Select all

FY   Vol(mmt) %growth
2012  172   
2013  185  7.5%
2014  189  2.2%
2015  189  0.0%
2016  203  7.4%
2017  214  5.4%
2018  217  1.4%

Between 2012 and 2018, fuel import volume has increased 15% . Nominal GDP has increased >50%.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 19 Sep 2018 08:32

^Many many many thanks for that table. I was searching for basis of my part 2 and that small table helps me immensely.

I am going to argue for continued taxation by center and actually states need to get off their state taxes on fuel (eventually).

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby kiranA » 19 Sep 2018 08:35

Suraj wrote:I'll point this out again - the center's tax is a fixed rupee amount per liter - Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. With the current price of petrol, the center's share is still Rs.19.48 - the rest is the remaining three variables.

The center's share does not change when prices fluctuate. It's the state's share that does - the states charge a percentage, and therefore their Rupee share of taxes go up and down depending on spot prices.

The Center is also responsible for compensating states for loss in revenue on account of GST being implemented. That money comes out of this pool of revenues. Claims of center "pocketing money" are absurd. They are the backstop here.

The center could cut their share by say Rs.2-4. But there's no guarantee prices will fall, simply because states set their own rates autonomously - when their receipts from center fall as a result, they will simply increase their rates to compensate. The only way around is a nationally agreed upon GST rate. "Center should cut their rate and prices will go down" is much too simplistic here.


THe chart I showed is for delhi which charges around 27% - their are plenty of states which are in 20s including populous ones like UP that means they all are pretty much lower than centers. And those in 30s may just match about centers and only in very few states it might exceed centers . Even on Sep 4th 2018 State share in delhi is significantly less than center. Refer here :
https://www.mycarhelpline.com/index.php ... &Itemid=10

Remember the word you used in your previous post is "lions share" is states. Thats absolutely not the case. Majority share is unambiguously centers for much of the population of the country.

And while you are correct the states share is a percentage and will go up as prices raise. Note that converse is also true . When prices were significantly less as they were in previous years centers share of taxes as proportion are even higher.

The crux of the matter is very clear and unambiguous. The centers tax which used be around 9 in 2013 went up to a staggering 19 now - more than a 100% increase. And dont forget Center was enjoying staggering Rs 21 in july 2017 after which there was a Rs 2 cut. State taxes also increased but significantly lesser and while states increased their taxes to protect fall in revenue as oil prices were decreasing (as they tax as percentage) the center has no such reason as it taxes in absolute numbers. The only reason for centers is to collect more money from the citizen.

Center pocketing a bulk of this money is also true and certainly not absurd. Of the Rs19 or so center imposes Rs8 is basically "road and infrastructure cess " which goes directly to center supervision where center bureacrats where and to whom to spend the money. Another component is additional excise duty which again goes directly to centers pocket. The only portion that out of which center shares 42% (with all of the states by the way not the state from which tax was collected - more money goes to populous and poor states like Bihar and less goes to say states like kerala) is the basic cenvat which is about 6-7 rupees only.

Refer here : http://www.jamewils.com/2017/09/decodin ... ax_21.html. This is slightly behind times as center reduced taxes by Rs 2 and rejigged some in to road and infrastructre cess after this article was published.


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