View: Higher fuel taxes, fewer subsidies are good policy

“Never waste a crisis” is an old adage. The Covid crisis is a good time to enact painful reforms. Some reforms like the suspension of labour laws for three years by some states have caught the headlines, and been criticised, rightly, as half-baked. No investor will come if the change is limited to three years.

More rational and politically courageous is the abolition of once-sacred subsidies plus higher taxation of petroleum products. The central government raised the excise duty on diesel and petrol in March and May and increased the road cess to Rs 8/litre. State governments have raised their taxes too. Higher taxes could yield up to 1% of GDP, a fiscal godsend since the Covid-induced recession looks like cutting government revenue by 2-3% of GDP.