12/11/2021 : The Hindu Editorial Summary
QUESTION : “India need to do twice as much as their targets announced at the COP26 summit to keep its commitment intact.” Comment
Editorial Topic : THE LOWDOWN ON INDIA’S GLASGOW ANNOUNCEMENT
Cop26 And India’s Goals
WHY IN NEWS ?
- The Prime minister of India has announced Five elements of his “5 Amrit Tatva” (five nectar) commitment at the start of the 26th Conference of Parties of the UN Convention on Climate Change.
- However, many believes that newly unveiled commitments at COP26 by India will not be achieved seeing the current energy scenario of India.
WHAT ARE THESE 5 GOALS ?
Prime Minister of India presented his 5 ‘Amrit-Tatva’ (called Panchamrit) at the COP26 key climate summit, which took place in Glasgow, Scotland. These five golden goals can be highlighted as:
- India will bring its non-fossil energy capacity to 500 GW by 2030
- By 2030, India will fulfil 50 percent of its energy requirement through renewable energy.
- India will cut down its net projected carbon emission by 1 billion tons from now until 2030.
- By 2030, India will bring down the carbon intensity of its economy by more than 45 %.
- By 2070, India will achieve the target of “net-zero”.
SIGNIFICANCE OF THE 5 GOALS :
- As per India’s existing Nationally determined contributions (NDC), there is a steady decline in Emissions Intensity of over 2% per annum from 2005 onwards.
o Thus, India’s recent commitment to reduce carbon intensity by 45% from 2005 levels are achievable and will transform India’s energy position at global level.
- India can easily achieved its recently announced emissions reduction target of one billion tonnes by 2030.
o India’s current annual emissions are around 2.8 billion tonnes and projected to reach 4.5 billion tonnes in 2030. So the pledged reduction would be a substantial 20%.
o However, India Railways’ net-zero 2030 target will cut 60 million tonnes annually, and LED bulbs cutting another 40 million tonnes a year.
o These both measure will cut one billion tonnes over 10 years and thus India can achieve this target easily.
CHALLENGES IN ACCOMPLISHING 5 GOALS :
The big disappointments with India’s stance at Glasgow deserve mention are:
- India refused to join over 110 countries in a declaration (called Glasgow Leaders’ Declaration on Forests and Land Use) to end deforestation by 2030.
- India also did not join the Global Methane Pledge by over 100 nations to reduce emissions of the short-lived but potent greenhouse gas by 30% by 2030 from 2020 levels.
o Methane is among the fastest-growing emissions in India.
- India’s pledges also do not mention the NDC target for forests and tree cover, in which India is known to be slipping.
o It has deleterious impacts on both the environment and livelihoods of tribals and other forest dwellers.
OTHER CHALLENGES :
- Government of India has set a target of installing of installing 175 GW of renewable energy capacity by the year 2022.
o However, India has reached only 101 GW of solar and wind due to numerous constraints.
Even if one adds large hydro and nuclear, current renewable energy installed capacity is 150 GW or under 40% of total.
- The Central Electricity Authority (CEA) projected 525 GW or 64.3% non-fossil fuel installed capacity for the year 2029-30, including 280 GW Solar and 140 GW wind.
o However, only 267 GW is projected to come from coal and lignite, so almost all of India’s future growth of capacity is to come from RE.
Despite this fact, India has not at Glasgow did not commit towards any additional coal-based power.
WAY FORWARD :
- India should support the dialogue on equity between nations that addresses the deep inequity in access to energy.
- The Glasgow pledges only focused on few sectors mostly related to electricity generation. However, a truly transformational low-carbon future must embrace many more aspects.
- Accelerated deployment of electric or fuel-cell vehicles must go alongside a rapid reduction in personal vehicle use and a major push for mass transportation.
- Carbon lock-ins and energy use need to be minimised through mandatory “green” construction codes for the huge housing and other buildings stock.
- There is need to boost employment-intensive recycling of waste goods and materials, including in solid and liquid waste management linked to methane recovery.
- Initiatives such as Infrastructure for Resilient Island States should be undertaken in India where coastal erosion and urban flooding due to extreme rainfall are acquiring threatening dimensions.
o At Glasgow summit, India launch international initiative called Infrastructure for Resilient Island States (IRIS).
o Aim: Providing assistance to small island nations with the help of developed countries.
India need to do twice as much as their targets announced at the COP26 summit to keep its commitment intact.
For this, India should do on-going updation of the NDC through a cross-partisan multi-stakeholder consultative process that would make it truly nationally determined and implemented.
QUESTION : What are the various levies contributing to the prices of petrol and diesel in India? Examine the rationale for the heavy taxing of these products in India.
Editorial Topic : A TAX BURDEN THAT ATTACKS THE FEDERAL RIGHTS OF STATES
Taxation And Federalism
WHY IN NEWS
Union Government reduced excise duty on petrol and diesel on the eve of Deepavali. While the reduction for petrol was ₹5, duty on diesel came down by ₹10.
ISSUES WITH CENTRE LEVYING CESS ON PETROL AND DIESEL :
- The Centre has been levying around ₹31 and ₹33 as additional cess on petrol and diesel, respectively, till the beginning of November.
- The Constitution does permit the Centre to levy cess and surcharges beyond the basic taxes and duties in extraordinary situations. But making it manifold higher than the basic taxes is nothing but a misuse of such provisions of the Constitution.
- These additional taxes do not go to a divisible pool and such a high burden of taxes is an attack on the people and the federal rights of States.
FACTORS DETERMINING FUEL PRICES :
Crude: The revision in the price of fuel corresponds to the change in the global crude oil prices on that day.
Rupee/ Dollar Exchange Rate: Indian oil companies import crude oil which is quoted in US dollars, but eventually incur the expense in rupees. Thus, even if the price of the crude oil is on the fall but the rupee is also weakening against the dollar at the same time, it may offset the potential gains to oil refiners.
Demand-supply situation: Short supply or low output of fuel often leads to a rise in its price; while conversely, an increase in the supply mostly results in the decrease in the price.
Logistics: Petrol and diesel transported to over longer distances to cities or regions farther from depots would typically be priced higher than at the places nearer to the oil companies’ storage areas.
Pricing mechanism: Daily or quaterly revision of retail prices of petrol and diesel across the country also affects the price of fuel. The government recently decided that petrol and diesel prices will change on daily basis in keeping with international rates.
REVENUE DATA :
- The basic excise duty is ₹1.40 and the rest of the tax is made up of special additional excise duty and cess which would not go to divisible pool and to the States.
- The Union government has collected around ₹3.72-lakh crore in 2020-21 as revenue from petroleum products as per the data published by the Petroleum Planning and Analysis Cell.
- Of this, only around ₹18,000 crore is collected as Basic Excise Duty which is around 4.8% of the total revenue from petroleum products. The divisible pool is only 41% of this ₹18,000 crore
- Around ₹2.3-lakh crore is collected as cess and the rest ₹1.2-lakh crore is collected as special additional excise duty.
- 95% of the total revenue from petroleum, which are not to be shared with the States at all. This is a classic example of undermining federalism prevailing in the country.
IMPACT ON FEDERALISM :
- After the implementation of Goods and Services Tax (GST), States have the right to decide the taxes on just three goods — petrol, diesel and liquor.
- By unilaterally taking away the bulk of the tax revenues on petrol and diesel, the Centre has done injustice to the States. This is obtuse use of fiscal federalism. All States must oppose this in a united manner.
- The promise was that the revenue neutral rate (RNR) will be implemented, which means States would get revenues similar to what they were getting before the implementation of GST.
- The average taxes on goods was 16% during the initial GST period. The average rate of taxes in goods at present is 11.3%. The consumer, however, hasn’t benefited from it instead inflation has also been rising.
- On an average, the country collects ₹1-lakh crore a month as GST — ₹12-lakh crore in a year; ₹6-lakh crore each for the States and the Centre. Had RNR been maintained, the total amount would have been ₹18-lakh crore at the rate of 16%. States would have received at least ₹3-lakh crore additionally.
- A detailed analysis must be done on why States are losing revenue. GST has to be streamlined to ensure RNR, but without hurting the common people.
ABOUT CESS AND SURCHARGES :
The Constitution allows the Centre to levy cess and surcharge which the Centre need not share with state governments. Both cess and surcharge are meant to be temporary in nature.
- Cess: Governments use Cess to fulfill a particular objective. Article 270 of the Constitution describes a cess.
o Cesses may be levied by the union or state governments.
o Cess example: an additional 4% Health & education cess is applicable on the income tax amount.It is also typically imposed as a tax on tax – the Swachh Bharat Cess was a 0.5% add on to Service Tax.
o In 2000, upon the recommendation of the Tenth Finance Commission, the Constitution was amended to provide, for the first time, legal backing for cesses and surcharges which would not be shared with the states.
o The logic of it was: since the purpose of the money was already earmarked, it made no sense to hand it over to the states.
- Surcharge: A surcharge is a tax on tax imposed for the purposes of the union. A surcharge is dealt with under Article 271 of the Constitution.
o A surcharge of 10% on a tax rate of 30% effectively raises the combined tax burden to 33%.
o In the case of individuals earning a net taxable salary of more than Rs 1 crore, a surcharge of 10% is levied on tax liability.
o The amount recovered in the form of surcharge also reaches the Consolidated Fund of India (CFI), and it can be spent for any purpose, just like the normal tax.
o Occasionally, the surcharge is also levied on a certain amount of expenditure. It applies in the form of a percentage on the amount of expenditure.
o Under Article 266 (1) of the Constitution of India, ‘Consolidated Fund of India’ for the Union Government includes revenues, which are received by the government through taxes and expenses incurred in the form of borrowings and loans.
Transparency issues: If the levy is in the nature of a cess, we can demand transparency and accountability on the usage of the proceeds for the end purpose. If it is a surcharge, the government may just say that the money can be used for any purpose.
- There has to be detailed deliberations by states & centre to help address the emerging issues within fiscal federalism.