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How much will a cow cess of Re1 on petrol generate?

LiveMint logoLiveMint 06-07-2017 Ragini Bhuyan

About two weeks ago, Subramanian Swamy, a Rajya Sabha member from the Bharatiya Janata Party (BJP) called for a cow cess of Re1 on petrol to fund gaushalas or cow shelters across the country. Swamy made the comment towards the end of his speech on the welfare of ‘Bos Indicus’, or the Indian cow, at an event organised by the Virat Hindustan Sangam (VHS) at the Bombay Stock Exchange.

In his speech, Swamy did not elaborate if the cess should be Re1 per litre of petrol. However, speaking over the phone, the secretary of VHS, Jagdish Shetty, confirmed that Swamy implied a cess of Re1 per litre. Later, over SMS, Swamy clarified that he stood by his demand for a cow cess, and added that the exact amount of cess, and whether it would be applicable to all refined petroleum products (which would include petrol, diesel, naptha, LPG, aviation turbine fuel or ATF and bitumen) was open to debate.

How much money would be generated by a cow cess of Re1 on petrol? Data from the Petroleum Planning and Analysis Cell (PPAC) of the ministry of petroleum and natural gas puts the consumption of petrol alone at over 32 billion litres in the fiscal year ending March 2017. Consumption of diesel, both high speed and light oil varieties, amounted to a little over 86 billion litres over the same period. A cess of Re1 per litre on petrol alone will thus generate annual revenues of over Rs3,000 crore. As chart 1 shows, this amount is greater than the budgets of several Union ministries such as the Union ministry of environment and forests and the Union ministry of culture.

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For the time being, let us assume that this cess will only be borne by those directly purchasing petrol from retail outlets. Data from the Household Survey on India’s Citizen Environment & Consumer Economy (ICE 360° survey) put the share of car-owning households at 11%, more than double the 5% figure that was recorded in census 2011. The ICE 360° survey was conducted by the independent not-for-profit organization, People Research on India’s Consumer Economy. Any cess on petrol would also affect two-wheeler owners. As of 2016, the share of households owning two-wheelers was 36%. Using the absolute numbers of households from census 2011, we find that close to 12 crore households across the country would be directly affected by a cow cess on petrol.

The last quinquennial consumer expenditure survey conducted by the National Sample Survey Organisation (NSSO) in 2011-12 shows that the rich consume petrol much more than the poor, and they would bear the brunt of the proposed cess.

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Estimates based on the NSSO survey suggest that the richest 10% of households in urban areas will pay a cess of Rs492 per household per annum, while the poorest will pay less than Rs6 per annum in the name of the holy cow, if the cess is implemented. These figures are likely to be under-estimates, as NSSO surveys typically underestimate consumption, especially of the rich. The financial implications of the cess will be different if it is imposed on other petroleum products as well.

While this is the first time a politician has called for a cow cess on petrol, the idea of a tax to fund cow welfare is not new. Rajasthan levies a 10% surcharge on stamp duty to raise money for cow protection, a move that was announced in this year’s budget. The state government has said that it needs anything between Rs200 crore and Rs500 crore to take care of its cattle population of above 5 lakh. The Punjab State Power Corporation imposes a cow cess on power bills, as do various municipal corporations across the state on different services and goods.

Given this reality, a central cow cess won’t be very surprising in ‘New India’.

Tadit Kundu contributed to this analysis.

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