Who Bears the Burden of Rising Prices of Petroleum Products Due to Taxes in India?

Abstract

The hike in the prices of petroleum products in India post 2014, primarily due to higher petroleum taxes, is examined. Household consumption expenditure data collected from the India Human Development Survey (2011–12) is analysed using the input–output framework to understand both the direct and indirect effects of rising prices of petroleum products. Results indicate that petroleum taxes are highly regressive, especially at the bottom two consumption expenditure deciles, as raising prices of petroleum products increases the overall cost of living. Results also reveal that households in the middle- and upper-income groups have the similar burden of rising petroleum prices, indicating that tax is not progressive. © 2023 Economic and Political Weekly. All rights reserved.