When a Govt’s loud-mouth cheerleaders start toning down their usual rhetoric and arrogance and start advising us disorientedly "à 𝙧𝙚𝙫𝙤𝙞𝙧 𝙘𝙚𝙧𝙩𝙖𝙞𝙣𝙚𝙨 𝙝𝙖𝙗𝙞𝙩𝙪𝙙𝙚𝙨 𝙙𝙚 𝙙é𝙥𝙡𝙖𝙘𝙚𝙢𝙚𝙣𝙩 𝙚𝙩 𝙙𝙚 𝙘𝙤𝙣𝙨𝙤𝙢𝙢𝙖𝙩𝙞𝙤𝙣. 𝙇𝙖 𝙨𝙞𝙩𝙪𝙖𝙩𝙞𝙤𝙣 𝙚𝙨𝙩 𝙙𝙞𝙛𝙛𝙞𝙘𝙞𝙡𝙚, 𝙤𝙪𝙞, 𝙢𝙖𝙞𝙨 𝙞𝙡 𝙛𝙖𝙪𝙩 𝙖𝙪𝙨𝙨𝙞 𝙨𝙖𝙫𝙤𝙞𝙧 𝙨'𝙮 𝙖𝙙𝙖𝙥𝙩𝙚𝙧", it becomes clear that, as a result of the massive public and political backlash following the controversial pension reform, this Govt has lost its verve and seems to lack the resolve to introduce new policy initiatives to regain the momentum.
𝑻𝒉𝒆 𝒉𝒊𝒌𝒆 𝒊𝒏 𝒇𝒖𝒆𝒍 𝒑𝒓𝒊𝒄𝒆𝒔 :
We remain among the countries with the most expensive petrol prices in the world because of the high taxes imposed on mogas and gas oil. The different contributions and levies account for around 40 per cent of the Mogas price and for diesel it is around 31 per cent. Exceptionally we have a levy on another levy !!! A VAT on our contributions !!! VAT adds another Rs 10 to the price structure.
I𝙨 𝙞𝙩 𝙟𝙪𝙨𝙩𝙞𝙛𝙞𝙚𝙙 𝙩𝙤 𝙝𝙖𝙫𝙚 𝙩𝙖𝙭𝙚𝙨 𝙖𝙣𝙙 𝙘𝙝𝙖𝙧𝙜𝙚𝙨 𝙘𝙤𝙢𝙥𝙧𝙞𝙨𝙞𝙣𝙜 𝙣𝙚𝙖𝙧𝙡𝙮 𝙝𝙖𝙡𝙛 𝙤𝙛 𝙩𝙝𝙚 𝙘𝙤𝙨𝙩 𝙤𝙛 𝙛𝙪𝙚𝙡? Government’s arguments are that these taxes help it in meeting prioritised capital expenditures and some recurrent expenditures. Actually , for the past ten budgets, capital spending, excluding the off-budget expenditures, have hovered around a mere 1.4% of GDP annually; thus our tax money is not being used to build a more advanced economy for the future generations, it is being spent on recurrent expenditure. This is irresponsible!
Moreover, t𝙝𝙚 𝙛𝙪𝙚𝙡 𝙩𝙖𝙭𝙚𝙨 𝙖𝙧𝙚 𝙖𝙡𝙨𝙤 𝙖 𝙩𝙖𝙭 𝙤𝙣 𝙥𝙧𝙤𝙙𝙪𝙘𝙩𝙞𝙤𝙣 𝙖𝙨 𝙩𝙧𝙖𝙣𝙨𝙥𝙤𝙧𝙩 𝙘𝙤𝙨𝙩𝙨 𝙖𝙧𝙚 𝙖𝙣 𝙞𝙢𝙥𝙤𝙧𝙩𝙖𝙣𝙩 𝙚𝙡𝙚𝙢𝙚𝙣𝙩 𝙤𝙛 𝙩𝙝𝙚 𝙘𝙤𝙨𝙩 𝙤𝙛 𝙥𝙧𝙤𝙙𝙪𝙘𝙩𝙞𝙤𝙣. Gasoline prices on the average over the past few years around the world show that our fuel prices are much higher than many of our competitive textile producers, namely Indonesia, India, Bangladesh,Malaysia, Sri Lanka, Pakistan, Philippines, Thailand, Morocco, China, and Madagascar. Thus the fuel taxes are harming our industry’s competitiveness.
𝗬𝗲𝘁 𝗮𝗻𝗼𝘁𝗵𝗲𝗿 𝗮𝗿𝗴𝘂𝗺𝗲𝗻𝘁 𝗮𝗴𝗮𝗶𝗻𝘀𝘁 𝗳𝘂𝗲𝗹 𝘁𝗮𝘅𝗲𝘀 𝗶𝘀 𝘁𝗵𝗮𝘁 𝗶𝘁 𝗶𝘀 𝗿𝗲𝗮𝗹𝗹𝘆 𝗷𝘂𝘀𝘁 𝗹𝗶𝗸𝗲 𝗮𝗻𝗼𝘁𝗵𝗲𝗿 𝗩𝗔𝗧 𝘁𝗵𝗮𝘁 𝗮𝗱𝘃𝗲𝗿𝘀𝗲𝗹𝘆 𝗮𝗳𝗳𝗲𝗰𝘁𝘀 𝘁𝗵𝗲 𝗺𝗶𝗱𝗱𝗹𝗲 𝗰𝗹𝗮𝘀𝘀 𝗮𝗻𝗱 𝘁𝗵𝗲 𝗽𝗼𝗼𝗿. It increases the regressivity of our already unfair tax system impacting far more heavily on both the middle class and the poor. (The poor spend a larger portion of their income on driving than the rich do). It also has a trickle-down effect on inflation, higher fuel prices mean higher freight, and higher freight makes transportable goods more expensive thus driving up the prices of goods and services throughout the economy. And a good chunk of the gains for the lower middle class and the poor via the populist measures like the "𝙋𝙧𝙞𝙘𝙚 𝙎𝙩𝙖𝙗𝙞𝙡𝙞𝙨𝙖𝙩𝙞𝙤𝙣 𝙁𝙪𝙣𝙙" would be snatched away at the gas pump and by inflation.
𝗧𝗵𝗲 𝗔𝗹𝗹𝗶𝗮𝗻𝗰𝗲 𝗱𝘂 𝗖𝗵𝗮𝗻𝗴𝗲𝗺𝗲𝗻𝘁’𝘀 𝗲𝗹𝗲𝗰𝘁𝗼𝗿𝗮𝗹 𝗺𝗮𝗻𝗶𝗳𝗲𝘀𝘁𝗼 𝘄𝗮𝘀 𝗿𝗶𝗴𝗵𝘁 𝗶𝗻 𝗲𝘅𝗽𝗹𝗶𝗰𝗶𝘁𝗹𝘆 𝗶𝗻𝗰𝗹𝘂𝗱𝗶𝗻𝗴 𝘁𝗵𝗲 𝗰𝗼𝗺𝗺𝗶𝘁𝗺𝗲𝗻𝘁𝘀 𝘁𝗼 𝗹𝗼𝘄𝗲𝗿 𝘁𝗵𝗲 𝗽𝗿𝗶𝗰𝗲𝘀 𝗼𝗳 𝗽𝗲𝘁𝗿𝗼𝗹𝗲𝘂𝗺 𝗽𝗿𝗼𝗱𝘂𝗰𝘁𝘀 𝗯𝘆 𝗿𝗲𝘃𝗶𝗲𝘄𝗶𝗻𝗴 𝗮𝗻𝗱 𝗿𝗲𝗱𝘂𝗰𝗶𝗻𝗴 𝗳𝘂𝗲𝗹 𝘁𝗮𝘅𝗲𝘀. During the November 2024 campaign, reducing the cost of gasoline and diesel was one of the central pillars of their economic platform to battle the rising cost of living. The alliance promised to achieve this price reduction primarily by re-evaluating the pricing structure and cutting back specific taxes built into the cost of fuel at the pump.
𝗧𝗵𝗲 𝗶𝗺𝗽𝗹𝗲𝗺𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝘁𝗵𝗶𝘀 𝗽𝗿𝗼𝗺𝗶𝘀𝗲 𝗵𝗮𝘀 𝗳𝗮𝗰𝗲𝗱 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗿𝗲𝗮𝗹𝗶𝘁𝗶𝗲𝘀.
The Govt acknowledged that it was unable to immediately lower petroleum taxes as originally intended, citing an unexpected 82% surge in international petroleum import costs and the bankrupt fiscal situation left by the previous regime.
𝗔𝗻𝘆 𝗮𝗹𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝘃𝗲 𝗽𝗼𝗹𝗶𝗰𝗶𝗲𝘀 𝘁𝗼 𝘁𝗮𝗰𝗸𝗹𝗲 𝘁𝗵𝗲 𝗿𝗶𝘀𝗶𝗻𝗴 𝗰𝗼𝘀𝘁 𝗼𝗳 𝗹𝗶𝘃𝗶𝗻𝗴, 𝗯𝗲𝘀𝗶𝗱𝗲𝘀 𝘁𝗵𝗲 𝗻𝗼𝗻-𝗳𝘂𝗻𝗰𝘁𝗶𝗼𝗻𝗶𝗻𝗴 "𝗣𝗿𝗶𝗰𝗲 𝗦𝘁𝗮𝗯𝗶𝗹𝗶𝘀𝗮𝘁𝗶𝗼𝗻 𝗙𝘂𝗻𝗱" ?
None, as we have seen in the case of the proposed means-test Pension Reform, there were no clear, phased alternative scenarios with distinct transparent financial impacts such that the different options could be weighed against each other in public on the basis of the cost- benefit breakdowns and savings projections. There was no active public debate on the different options essential for successful pension reform. Public dialogue builds trust and legitimacy. Stakeholders and citizens were not actively engaged in discussions to balance long-term fiscal sustainability with social protection.
Similarly in the present case, we have a Govt relying on unilateral policy announcements without involving proper public consultations and LePep’s consensus - a Govt lacking in initiatives, thus confirming that w𝙚 𝙖𝙧𝙚 𝙙𝙚𝙖𝙡𝙞𝙣𝙜 𝙬𝙞𝙩𝙝 𝙖 𝙗𝙪𝙣𝙘𝙝 𝙤𝙛 𝙖𝙢𝙖𝙩𝙚𝙪𝙧𝙨, who are simply reacting to pressure rather than executing a well-planned financial strategy.
𝐄𝐯𝐞𝐧 𝐟𝐨𝐫 𝐚 𝐫𝐞𝐠𝐢𝐦𝐞 𝐬𝐭𝐢𝐥𝐥 𝐜𝐥𝐢𝐧𝐠𝐢𝐧𝐠 𝐭𝐨 𝐭𝐡𝐞 𝐥𝐨𝐰 𝐭𝐚𝐱 𝐥𝐢𝐛𝐞𝐫𝐚𝐥 𝐞𝐜𝐨𝐧𝐨𝐦𝐲 𝐦𝐨𝐝𝐞𝐥(𝐰𝐢𝐭𝐡 𝐚 𝐰𝐞𝐥𝐟𝐚𝐫𝐞 𝐬𝐲𝐬𝐭𝐞𝐦 𝐠𝐫𝐚𝐟𝐭𝐞𝐝 𝐭𝐨 𝐢𝐭), there are alternatives , different financial strategies that do impact upon the effectiveness of government's fiscal policy and the management of public spending. 𝗧𝗵𝗲 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗱𝗲𝗺𝗮𝗻𝗱𝘀 𝗴𝗿𝗲𝗮𝘁𝗲𝗿 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗮𝗻𝗱 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲 𝗲𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝗰𝘆-𝘁𝗵𝗮𝘁 𝗶𝘀, 𝘁𝗵𝗲 𝗼𝗽𝘁𝗶𝗺𝗶𝘀𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝗽𝘂𝗯𝗹𝗶𝗰 𝘀𝗽𝗲𝗻𝗱𝗶𝗻𝗴 .
For example, some reduction in fuel taxes could have been accompanied by simultaneously cutting of Govt excess, eliminating waste and redundant bureaucracy, reducing political perks, downsizing bloated public entities, freezing non-essential governmental purchases, deferring non-essential capital expenditures and reforming inefficient public spending , 𝗲𝘀𝗽𝗲𝗰𝗶𝗮𝗹𝗹𝘆 𝘁𝗵𝗲 𝗿𝗲𝗴𝗿𝗲𝘀𝘀𝗶𝘃𝗲 𝗽𝘂𝗯𝗹𝗶𝗰 𝘀𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝗱𝗶𝘀𝗽𝗿𝗼𝗽𝗼𝗿𝘁𝗶𝗼𝗻𝗮𝘁𝗲𝗹𝘆 𝗯𝗲𝗻𝗲𝗳𝗶𝘁𝗶𝗻𝗴 𝘄𝗲𝗮𝗹𝘁𝗵𝗶𝗲𝗿 𝗶𝗻𝗱𝗶𝘃𝗶𝗱𝘂𝗮𝗹𝘀 -𝗽𝗼𝗹𝗶𝗰𝗶𝗲𝘀 𝗹𝗶𝗸𝗲 𝐟𝐫𝐞𝐞 𝐭𝐫𝐚𝐧𝐬𝐩𝐨𝐫𝐭 𝐚𝐧𝐝 𝐮𝐧𝐢𝐯𝐞𝐫𝐬𝐚𝐥 𝐬𝐮𝐛𝐬𝐢𝐝𝐢𝐞𝐬 𝘁𝗵𝗮𝘁 𝗻𝗲𝗲𝗱 𝘁𝗼 𝗯𝗲 𝘀𝗰𝗿𝘂𝘁𝗶𝗻𝗶𝘇𝗲𝗱 𝗳𝗼𝗿 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗶𝗻𝗲𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝗰𝘆.
Indeed most of these redistributive social policies have been captured by the better-off consumers from the middle and rich classes. 𝘿𝙤 𝙩𝙝𝙚𝙨𝙚 𝙨𝙤𝙘𝙞𝙖𝙡 𝙥𝙧𝙤𝙜𝙖𝙢𝙢𝙚𝙨 𝙧𝙚𝙖𝙡𝙡𝙮 𝙝𝙚𝙡𝙥 𝙩𝙝𝙚 𝙥𝙤𝙤𝙧? Subsidies for items of middle class consumption, for example on LPG, rice and wheat, contribute to the fiscal deficit, and thereby to inflation which is a crushing burden on the poor. This amounts to a betrayal of the very downtrodden sections of people that the redistributive social policies claim to cater for. And we talk of fiscal responsibility in our AC offices powered by subsidised gas, eating dholl puris and rotis made from subsidized flour and dropping our kids in our duty-free cars for their private tuitions that have become indispensable for a free education system and its wasteful free transport, turning out to be huge liabilities for the country.
Direct intervention in the form of education, vocational training, health care, , nutrition for children and pregnant mothers, low-cost housing, shelter for all and old-age homes for the destitute, etc., would have a direct impact on the poor’s well-being and growth. The redistributive policies have paid little attention to such important development issues as well as those which actually matter to the poor. 𝗧𝗵𝗲𝘀𝗲 𝗽𝗼𝗹𝗶𝗰𝗶𝗲𝘀 𝗻𝗲𝗲𝗱 𝗺𝗼𝗿𝗲 𝗼𝗳 𝘀𝗶𝗻𝗴𝗹𝗲-𝗺𝗶𝗻𝗱𝗲𝗱 𝗳𝗼𝗰𝘂𝘀 𝗼𝗻 𝗶𝘀𝘀𝘂𝗲𝘀 𝘁𝗵𝗮𝘁 𝗮𝗿𝗲 𝗮𝗳𝗳𝗲𝗰𝘁𝗶𝗻𝗴 𝘁𝗵𝗲 𝗺𝗮𝗿𝗴𝗶𝗻𝗮𝗹𝗶𝘀𝗲𝗱 𝘀𝗲𝗰𝘁𝗶𝗼𝗻𝘀 𝗼𝗳 𝘀𝗼𝗰𝗶𝗲𝘁𝘆, 𝗶𝗻𝘀𝘁𝗲𝗮𝗱 𝗼𝗳 𝗽𝗿𝗼𝘃𝗶𝗱𝗶𝗻𝗴 𝗴𝗲𝗻𝗲𝗿𝗮𝗹 𝘁𝗿𝗮𝗻𝘀𝗳𝗲𝗿𝘀 𝘁𝗵𝗮𝘁 𝗶𝗻𝗰𝗹𝘂𝗱𝗲 𝗲𝗹𝗶𝘁𝗲 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗶𝘀𝘀𝘂𝗲𝘀 𝘁𝗼 𝘁𝗵𝗲 𝗲𝘅𝗰𝗹𝘂𝘀𝗶𝗼𝗻 𝗼𝗳 𝗽𝗿𝗲𝘀𝘀𝗶𝗻𝗴 𝘀𝗼𝗰𝗶𝗮𝗹 𝗽𝗿𝗼𝗯𝗹𝗲𝗺𝘀,.
𝑻𝒉𝒆 𝒄𝒉𝒂𝒍𝒍𝒆𝒏𝒈𝒊𝒏𝒈 𝒆𝒄𝒐𝒏𝒐𝒎𝒊𝒄 𝒄𝒍𝒊𝒎𝒂𝒕𝒆 𝒑𝒓𝒆𝒔𝒆𝒏𝒕𝒆𝒅 𝒕𝒉𝒆 𝒈𝒐𝒗𝒆𝒓𝒏𝒎𝒆𝒏𝒕 𝒘𝒊𝒕𝒉 𝒂 𝒖𝒏𝒊𝒒𝒖𝒆 𝒐𝒑𝒑𝒐𝒓𝒕𝒖𝒏𝒊𝒕𝒚 𝒕𝒐 𝒓𝒆𝒔𝒆𝒕- demonstrating vision, competence, fostering innovation, and establishing a new social contract. It has not fully capitalized on this moment-an opportunity gone waste !
