The price hike of petrol has struck the common man quite hard. One will point out that India as the second largest population and with the ever increasing demand of private vehicles, the cost of petrol is bound to rise. But is this excuse really a valid and legit excuse? What does the crude price of oil and the tax rates (both central and state) have to say about this?
The cost of crude oil saw an all time high in May 2012 when it touched $124 bbl. The crude oil prices now run at $72.5 bbl. The crude oil prices have lowered by -41% but the petrol prices have seen an hike of +24%. One possible explanation is the falling value of the Indian currency. The Indian Rupee has been weakened by -38% since 2012. Another is the levied taxes.
The central excise duty and VAT have been on a steady rise. Petrol taxation does not come under GST, hence there is no upper limit to the taxes levied. The petroleum reaching the masses, passes from the Oil Manufacturing Companies to the petrol station, where the dealer gets a commission on every litre sold, the central and state government extract their excise duty and VAT from every litre sold. So, if we reduce the taxes the prices will be automatically lowered. If the taxation of petrol and diesel is bought under the GST regime, that will serve the purpose as well.
Ever since the price hike of petrol and all related products, the present government has claimed in various statements that it has successfully paid off more than Rs. 1.5lakh crore worth of oil bonds that were issued during the regime of the previous UPA government. It has also deposited an interest of Rs. 40,000 crore.
However it is very important to check the real facts, whether that is the cause behind the hike in the petrol prices.
As per annexure 6E, that is available in the public domain, the total of the pending liabilities on Oil bonds added up to Rs. 1,34,432 crore. An amount of Rs 3,500 only, has been repaid in 2015. Apart from that it has paid an interest of Rs, 40,225 crore in between 2014 – 2015 and Rs 9989.96 crore in between 2018 – 2019. The total amount of excise duty collected by the government between 2014 – 2015 and 2017 – 2018 amounts to Rs. 7,49,485 crore. During this entire period of time the payments made on repayments and interest amounts to Rs. 43,725 only, which is less than 6% of what is collected. Thus this is not at all a valid excuse to camouflage the price hike, or rather the rise in taxes on petrol.
If we factually look into the matter then blaming the demand and supply curve is nonsense. Indians have taken to a number of fuel saving measures themselves. There are some cab drivers who switch off the air conditioning intermittently, while some have given up the luxury of using their vehicles. That apart the states of West Bengal, Andhra Pradesh, Rajasthan, have decided to cut down on the taxes to bring some relief to the common man. However the central does not seem to be too keen on making any such bold statements. The rise in petrol and diesel prices leads to an inflation within the economy as most products distributed within the country is done on vehicles. If this continues, then basic commodities will see a rise in prices, affecting the investment plans of the common Indian. Petrol prices have hike for about 10 times in a span of 3 years only and it is still rising.
Petroleum is the golden egg laying goose of the government that helps fill its coffers. It is hardly likely that the costs will ever reduce.
Now keeping the upcoming elections in mind, hasn’t the government thought of curbing this petrol hike and finding a resolution. While most think the Government is ignorant, we believe they are just aiming at keeping the deficit in control, which doesn’t seem to be a great idea.
For a layman, be it in any state of the country, the hike in both petrol and diesel price has been extremely troublesome. This hike in price has leaded to the increase in the price of commodities as the commute/ transportation has become expensive.
As per our perspective if the price hike is not reduced and monitored, the ruling government will have to lose out on multiple votes in the upcoming elections due to to this inflation which they claim to be as a Global phenomenon.
We look forward to new amendments from the Government keeping the goodwill of its citizens as its first priority. Let’s hope for the best!