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Over the last few days, the retail prices of petrol and diesel have touched an all-time high. In Delhi, petrol was selling at 74.6/litre on April 25, 2018, while diesel was at 66/litre.
Petroleum products are used as raw materials in various sectors and industries such as transport and petrochemicals. These products may also be used in factories to operate machinery or generators. Any fluctuation in the price of petrol and diesel impacts the production and transport costs of various items. When compared to other neighbouring countries, India has the highest prices for petrol and diesel.
Note: Prices as on April 1, 2018. Prices for India pertain to Delhi.
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.
How is the price of petrol and diesel fixed?
Historically, the price of petrol and diesel in India was regulated, i.e. the government was involved in the deciding the retail price. The government deregulated the pricing of petrol in 2010 and diesel in 2014. This allowed oil marketing companies to determine the price of these products, and revise them every fortnight.
Starting June 16, 2017, prices for petrol and diesel are revised on a daily basis. This was done to with the idea that daily revision will reduce the volatility in retail prices, and protect the consumer against sharp fluctuations. The break-up of retail prices of petrol and diesel in Delhi on April 25, 2018 can be found below. As seen in the table, over 50% of the retail price of petrol comprises central and states taxes and the dealer’s commission. In case of diesel, this amount is close to 40%.
Table 1: Break-up of petrol and diesel prices in Delhi (on April 25, 2018)
|
Component |
Petrol |
Diesel |
||
| Rs/litre | % of retail price | Rs/litre |
% of retail price |
|
| Price Charged to Dealers | 35.7 | 48% | 38.4 | 58% |
| Excise Duty (levied by centre) | 19.5 | 26% | 15.3 | 23% |
| Dealer Commission | 3.6 | 5% | 2.5 | 4% |
| VAT (levied by state) | 15.9 | 21% | 9.7 | 15% |
| Retail Price | 74.6 | 100% | 65.9 | 100% |
Does India produce enough petroleum to support domestic consumption?
India imports 84% of the petroleum products consumed in the country. This implies that any change in the global prices of crude oil has a significant impact on the domestic price of petroleum products. In 2000-01, net import of petroleum products constituted 75% of the total consumption in the country. This increased to 95% in 2016-17. The figure below shows the amount of petroleum products consumed in the country, and the share of imports.
Note: Production is the difference between the total consumption in the country and the net imports.
Sources: Petroleum Planning and Analysis Cell; PRS.
What has been the global trend in crude oil prices? How has this impacted prices in India?
Over the last five years, the global price of crude oil (Indian basket) has come down from USD 110 in January 2013 to USD 64 in March 2018, having touched a low of USD 28 in January 2016.
While there has been a 42% drop in the price of global crude over this five-period, the retail price of petrol in India has increased by 8%. During this period, the retail price of diesel increased by 33%. The two figures below show the trend in prices of global crude oil and retail price of petrol and diesel in India, over the last five years.
How has the excise duty on petrol and diesel changed over the last few years?
Under the Constitution, the central government has the powers to tax the production of petroleum products, while states have the power to tax their sale. Petroleum has been kept outside the purview of the Goods and Services Tax (GST), till the GST Council decides.
Over the years, the central government has used taxes to prevent sharp fluctuations in the retail price of diesel and petrol. In the past, when global crude oil prices have increased, duties have been cut. Since 2014, as global crude oil prices declined, excise duties have been increased.
Sources: Petroleum Planning and Analysis Cell; PRS.
As a consequence of the increase in duties, the central government’s revenue from excise on petrol and diesel increased annually at a rate of 46% between 2013-14 and 2016-17. During the same period, the total sales tax collections of states (from petrol and diesel) increased annually by 9%. The figure below shows the trend in overall collections of the central and state governments from petroleum (including receipts from taxes, royalties, and dividends).
Notes: Data includes tax collections (from cesses, royalties, customs duty, central excise duty, state sales tax, octroi, and entry tax, among others), dividends paid to the government, and profit on oil exploration.
Data sources: Petroleum and Planning Analysis Cell; Central Board of Excise and Customs; Indian Oil Corporation Limited; PRS.
Yesterday, the Supreme Court delivered its first verdict in a series of legal challenges that have been made against the Aadhaar project.[1] In the present matter, the court was examining whether a provision of the Finance Act, 2017 that made Aadhaar mandatory for filing of income tax returns and applying for Permanent Account Number (PAN) cards was constitutionally valid. The court has upheld the validity of this provision, subject to a few qualifications. Below, we discuss the background of the Aadhaar project, why the courts have stepped in to examine its legality, and some aspects of the recent judgement.
What is Aadhaar about, and how is it being used?
Earlier, various identity proofs were required for access to governments benefits, subsidies and services, such as a ration card, driving license or voter id. However, as these proofs could be easily duplicated or forged, there was leakage of benefits and subsidies to ineligible beneficiaries. The Aadhaar project was initiated in 2009 to address these problems. It was envisaged as a biometric-based unique identity number that could help identify eligible persons. It was thought to be a more reliable identity proof, because it sought to authenticate a person’s identity based on their unique biometrics, like fingerprints and iris scans.1
In 2016, Parliament enacted the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 to provide legislative backing to the project. This Act allowed Aadhaar to be used for authentication purposes by the central and state government, as well as by private bodies and persons.[2]
Under its provisions, government has been issuing various notifications making Aadhaar mandatory for government projects, such as LPG subsidies and Mid-Day Meal scheme.[3] In addition, in 2017, Parliament passed the Finance Act to amend the Income Tax Act, 1961, and made Aadhaar mandatory for filing of income tax returns, and applying for PAN.[4]
What is the information collected under Aadhaar?
To obtain an Aadhaar number, a person is required to submit their : (i) biometric information (photograph, 10 fingerprints, scans of both irises), and (ii) demographic information (name, date of birth, gender, residential address) to the Unique Identification Authority of India (UIDAI).[5] The Aadhaar number, the demographic and biometric information (called identity information) is together stored in the Central Identities Data Repository. In addition, every time a person’s identity is authenticated using Aadhaar, information related to the authentication request is recorded as well.
How is this information protected?
While India does not have a comprehensive law on privacy and data security, the Aadhaar Act, 2016 has some protections. For example, it prohibits UIDAI and its officers from sharing a person’s identity information and authentication records with anyone. It also forbids a person authenticating another person’s identity from collecting or using their information without their consent. Other protections include prohibitions against publicly displaying a person’s Aadhaar number and sharing of a person’s fingerprints and iris scans with anyone. Note that there are penalties prescribed for violation of these provisions as well.[6]
However, the Act permits information be disclosed in the interest of national security and on the order of a court.[7]
The UIDAI authority has been made responsible for the operation and maintenance of the Aadhaar database, and for laying down the security protocols for its protection.[8]
Why did the courts step in?
Even as Aadhaar is being rolled out, with about 111 crore of the 125 crore population already on the database, there are several important constitutional and legal questions around the unique identity project.[9][10] While yesterday’s judgement addresses one of these issues, other questions remain unresolved. A description of the key legal questions is provided below.
Privacy: It has been argued that the collection of identity data without adequate safeguards interferes with the fundamental right to privacy protected under Article 21 of the Constitution. Article 21 guarantees right to life and personal liberty. In August 2015, a three judge bench of the Supreme Court passed an order stating that a larger bench must be formed to decide the questions of: (i) whether right to privacy is a fundamental right, and (ii) whether Aadhaar violates this right.[11] However, the court has not set up a larger bench to hear these petitions till June 2017.[12]
Mandatory vs voluntary: Another question before the court is whether Aadhaar can be made mandatory for those government benefits and services, that citizens are entitled to under law. In 2015, the Supreme Court passed some interim orders stating that: (i) Aadhaar cannot be made mandatory for providing citizens with benefits and entitlements, and (ii) it can only be used for seven schemes including PDS distribution of foodgrains and kerosene, LPG distribution scheme, MGNREGA wage payments, and Prime Minister’s Jan Dhan Yojana.11
Subsequently, Parliament enacted the Aadhaar Act, 2016, and the government has been issuing notifications under it to make Aadhaar mandatory for various schemes.3 In light of this, more petitions have been filed challenging these notifications.[13] Judgements on these petitions are awaited as well.
Linking Aadhaar with PAN: In 2017, after Parliament made Aadhaar mandatory for filing of tax returns and applying for PAN under the Income Tax Act, 1961, fresh petitions were filed in the Supreme Court. The new provision stated that if a person failed to link their PAN with the Aadhaar number by a date notified by the central government, their PAN will be invalidated. The government said this will decrease the problem of multiple PAN cards obtained under fictitious names and consequent tax fraud and tax evasion, because Aadhaar will ensure proper identification.1,[14] However, the petitioners argued that this may interfere with a person’s fundamental rights, such as their right to practice any profession, trade or business and right to equality. It is this question that has been addressed in the new judgement.1
Money Bill: The fourth question is related to the manner in which the Aadhaar Act, 2016 was passed by Parliament. The Act was passed as a Money Bill. A Money Bill only needs to be passed by Lok Sabha, while Rajya Sabha may make non-binding recommendations on it. In case of the Aadhaar Act, Rajya Sabha made some recommendations that were rejected by Lok Sabha. It has been argued before the courts that the Aadhaar Act does not qualify as a Money Bill because it contains provisions unrelated to government taxation and expenditure.13,[15]
What has the judgement held?
The Supreme Court has held that the new provision of the Income Tax Act that makes Aadhaar mandatory for income tax assessees is not in violation of the fundamental right to equality, or the fundamental right to practice one’s profession or trade. The petitioners had argued that the new provision discriminates between individual and non-individual assessees (e.g. companies or firms), because it only seeks to address tax fraud by individuals. They had also contended that Aadhaar could not address the problem of tax fraud through duplicate PANs because there was evidence to show that people had multiple Aadhaar numbers as well. The court rejected these arguments (as well as arguments related to freedom to carry on business), stating that Aadhaar is perceived as the best method of eliminating duplicate PANs, and therefore there is reasonable rationale behind linking the PAN database with Aadhaar.1
The court decided not to examine questions related to human dignity and privacy, on the ground that issues affecting Article 21 will be examined by a larger bench to be set up by the court. However, it granted relief to people, who have not enrolled for Aadhaar, by stating that their PAN cards cannot be invalidated till the time when the matter is finally decided by such a bench.
This, in effect, means that the debate around constitutionality and legality of the Aadhaar project will remain ongoing till a judgement is finally pronounced on whether Aadhaar is in violation of right to privacy under Article 21.
[1] Binoy Viswam vs Union of India, Supreme Court, Writ Petition (Civil) No. 247 of 2017, http://www.sci.gov.in/pdf/jud/wc24717_Sign.pdf.
[2] Sections 7, 8 and 57, Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.
[3] Unstarred Question No. 4126, Lok Sabha, March 27, 2017; Unstarred Question No. 1209, Lok Sabha, February 9, 2017; S.O. 371 (E), Ministry of Consumer Affairs, Food and Public Distribution, February 8, 2017, http://dfpd.nic.in/writereaddata/Portal/Magazine/Document/1_211_1_aadhaar-notification.pdf; S.O. 369 (E), Ministry of Agriculture and Farmers Welfare, February 8, 2017, http://www.egazette.nic.in/WriteReadData/2017/174076.pdf.
[4] The Finance Bill, 2017, http://www.prsindia.org/billtrack/the-finance-bill-2017-4681/.
[5] Regulations 3 and 4, Aadhaar (Enrolment and Update) Regulations, 2016.
[6] Sections 28-47, Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.
[7] Section 33, Section 23, Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.
[8] Section 23, Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.
[9] “UIDAI achieves 111 crore mark on Aadhaar generation; Unique identity covers over 99 percent adult residents of India”, Press Information Bureau, January 27, 2017.
[10] Justice K. Puttaswamy (Retd) and Another vs Union of India and Others, Supreme Court, Writ Petition (Civil) No. 494 of 2012; Jairam Ramesh vs Union of India, Writ Petition (Civil) 231 of 2016; S.G. Vombatkere and Another vs Union of India and Others, Supreme Court, Writ Petition (Civil) 797/ 2016; “Aadhaar: What are the pending cases before the Supreme Court”, Indian Express, May 31, 2017, http://indianexpress.com/article/india/aadhaar-what-are-the-pending-cases-before-the-supreme-court/.
[11] Justice K. Puttaswamy (Retd) and Another vs Union of India and Others, Supreme Court, Writ Petition (Civil) No. 494 of 2012, September 23, 2013, August 11, 2015, October 15, 2015.
[12] “The Aadhaar/ PAN Judgement”, Indian Constitutional Law and Philosophy Blog, https://indconlawphil.wordpress.com/2017/06/09/the-aadhaarpan-judgment/.
[13] “Aadhaar: What are the pending cases before the Supreme Court”, Indian Express, May 31, 2017, http://indianexpress.com/article/india/aadhaar-what-are-the-pending-cases-before-the-supreme-court/.
[14] Uncorrected Lok Sabha Debates, March 22, 2017, Pg. 240, http://164.100.47.193/newdebate/16/11/22032017/Fullday.pdf.
