Fuel for thought

Fuel prices in Nagaland have once again become a lightning rod in public debate, highlighting the uneasy trade-off between revenue generation and the cost of consumer items due to transportation costs. Fuel prices are food for political discourses but presently, political parties in Nagaland are in a comatose state. However, recently, the state unit of the National People’s Party show that petrol and diesel prices in Nagaland are higher than in neighbouring northeastern states such as Meghalaya and Arunachal Pradesh. The disparity is not due to supply inefficiencies but largely the result of state-level taxation. As of early September, petrol in Nagaland retailed just under Rs.98 per litre-about Re. 1 higher than in Meghalaya and Rs.5-6 more than in Arunachal Pradesh. Diesel, at around Rs.88 per litre, was again marginally above Meghalaya and considerably higher than Arunachal. While a few rupees per litre may seem insignificant, the cumulative effect on households, transport operators, and small businesses is punishing. For an economy where fuel powers not just vehicles but also logistics and essential services, these higher costs ripple outward, feeding inflation and eroding disposable incomes.The core issue is taxation. Since petroleum products remain outside the GST framework, states enjoy wide latitude in imposing levies. Nagaland charges 21.75% VAT on petrol and 17.20% on diesel, or equivalent fixed sums, making fuel taxation a significant contributor to final retail prices. By contrast, Meghalaya and Arunachal maintain lower rates, directly easing the burden on consumers.Yet, taxation is not a simple matter of consumer grievance. For small hill states with limited revenue streams and steep infrastructure costs, fuel levies are a crucial financial lifeline. They help governments mobilise resources to complement central grants and fund development projects. Nagaland’s fiscal challenge, therefore, is not unique, but the stakes are higher given its chronic underinvestment in economic foundations. Meghalaya, for example, has emerged as one of the region’s stronger performers, partly by leveraging growth to widen its tax base. Mizoram has pursued infrastructure connectivity with determination, freeing itself from the long shadow of landlocked isolation. Manipur, by virtue of geography, has positioned itself as a potential trade hub with Southeast Asia. In contrast, Nagaland however, remains constrained by political narratives that have dominated the state’s discourse for decades. The result is a cycle where unresolved political issues eclipse urgent economic priorities. For Nagaland, the pressing question is how to balance fiscal sustainability with public welfare. High fuel taxes may bolster the treasury, but they also raise transport costs, inflate prices of essentials, and disproportionately hurt the poor. If left unchecked, this not only burdens households but also weakens competitiveness in trade and services. The way forward lies in broadening the state’s revenue base beyond fuel. Tourism, agriculture, and sustainable resource management are obvious avenues waiting to be tapped. Investments in efficient transport networks and fuel-efficient public mobility could also help reduce dependence on high levies. Above all, what Nagaland needs is political clarity and administrative competence. Fuel taxation may be the immediate spark of discontent, but it points to a deeper truth: the state cannot afford to mortgage its economic future to a narrow revenue strategy. A coherent, long-term economic plan-rooted in diversification, infrastructure, and governance-is the only way to ensure that economic progress does not come at the cost of public welfare.