Politics behind the hike in Fuel Prices

Prasanna Kumar Sabat

Fuel prices have been hiked ten times in the last 13 months, affecting the monthly budget of every common man. Everybody is worried, including our political parties. But then, the Government in power has to take the onus onto itself; it cannot blame anyone. There is clamour from all quarters against the price rise. But, is the hue and cry over the spiraling fuel prices really going to last, to bring any effect? Well, it mayn’t. These symbolic protests have now become a routine affair after every hike; they continue for a few days and then the common Indian disease – short term memory loss – takes over. Almost everyone is responsible for this fuel price rise (in however little way it may be), and so also is affected by it, in one way or the other. So we must contribute in finding a real, viable solution to this recurring problem. 

Historically the price of petrol is hiked every now and then but not diesel or kerosene. Diesel and kerosene have been designated as the common man’s necessities but not petrol. One more argument coming in favour of keeping the diesel prices in check is that otherwise it would fuel inflation, as all our goods transporting systems use diesel. At the same time they forget that all the small vehicles (say the two-wheelers) used by the common man run on petrol, not diesel. The rich and the affluent people nowadays have started using diesel-run cars and SUVs, and get to buy diesel at subsidised prices. With price hike of petrol and controlled diesel prices, the demand for diesel-run cars has increased but there is no such option available for the two wheeler bikes and scooters! If the diesel price is also decontrolled and increased with the prevailing crude price, the burden of both the monthly fuel expenditures as well as inflation would be much less and more fruitful for the common man than the gain of subsidised diesel prices being enjoyed by the rich and the transport company owners. But then, they have enough influence to keep the price under control as they are the people who help the political parties to sail through the elections by their generous donations, and not the common man who sometimes even find their names missing from the voter list! 

A major component of the petrol price is the tax, for both the Central Government and the State Government. Without taxes in India, Petrol would cost Rs. 23.37 per litre in Delhi but after including the tax, it rises up to Rs. 63.70. Let us compare the prices of petrol across the world: 

1. Petrol in Delhi is priced at Rs. 63.70 a litre, 
2. USA @ Rs. 42.82 per litre 
3. Pakistan @ Rs. 41.81 a litre 
4. Sri Lanka @ Rs. 50.30 per litre 
5. Bangladesh @ Rs. 44.80 a litre 
6. Nepal @ Rs. 63.24 per litre 
7. France @ Rs. 94.97 per litre 
8. Germany @ Rs. 95.99 a litre 
9. The United Kingdom @ Rs. 96.39 per litre 
10. Italy @ Rs. 96.79 a litre. 

On the contrary, without taxes, diesel would cost Rs. 24.90 per litre in Delhi. So there is hardly any difference in prices of petrol and diesel before the inclusion of the tax. But after including the taxes, the price differential between petrol and diesel sees a noticeably widened gap! The catch is that the taxes are calculated on percentage basis, and so the difference of Rs 1.53 results into Rs 22.41 difference at the hands of the consumer. 

Let us now compare the prices of diesel across the world: 

1. Delhi – @ Rs. 41.29 per litre 
2. USA -- @ Rs. 45.84 per litre 
3. France – @ Rs. 69.87 per litre 
4. Germany – @ Rs. 72.54 per litre 
5. UK – @ Rs. 82.93 per litre 
6. Italy – @ Rs. 74 per litre 
7. Pakistan – @ Rs. 46.70 per litre 
8. Nepal – @ Rs. 45.38 per litre 
9. Sri Lanka – @ Rs. 34.37 per litre 
10. Bangladesh – @ Rs. 27.32 per litre. 

The interesting part of the above data is how the petrol price is kept higher but diesel cheaper in India as compared to the international market, with the exception of the European countries. According to latest projection by PPCA (Petroleum Planning and Analysis Cell), for the first time in fifteen years, diesel’s demand growth has been far more than petrol. Few years ago, the diesel running vehicles were one in ten as compared to the current statistics of nearly half of the people preferring the diesel variants to get the best out of the gap of nearly Rs 26 a litre. But can’t the people who are able to afford the high costing diesel-run vehicles, ignoring their petrol peers to the tune of one and half lakhs, pay a few extra bucks for the decontrolled diesel price? If they cannot, at least the demand of the fuel will decrease, and so may be the price of fuel as well. 

Now the cheapest fuel available in India is Kerosene, which is meant for the poor people but 70% of the kerosene is used for adulteration of petrol. So more the difference between petrol and kerosene prices, more is the profit for the oil mafia. There is hardly any profit margin in the retail price of petrol and diesel for the pump owners, but still then, why are so many influential people fighting for the pump licenses? That says it all. 

Let us check the Kerosene prices in the neighborhood countries: 

Delhi – Rs. 14.83 per litre 
Sri Lanka – Rs. 24.67 per litre 
Bangladesh – Rs. 27.32 per litre 
Pakistan – Rs. 44.06 per litre. 

Domestic LPG Price per cylinder – 

1. India – Rs. 399 per 14.2 kg cylinder 
2. Pakistan – Rs. 757.04 per cylinder 
3. Sri Lanka – Rs. 863.40 per cylinder 
4. Bangladesh – Rs. 469.24 per cylinder 
5. Nepal – Rs. 819.60 per cylinder. 

The price of kerosene is subsidised by Rs 23.74 and LPG by Rs 247 per cylinder in India. That is why the LPG cylinders are sold in the black markets and so many private LPG gas businesses have been flourishing. A genuine household family doesn’t get a subsidised gas connection, but the gas agencies circulate so many nameless customers and use the gas cylinders for their personal gain. The day the subsidy is taken out, all these corrupt practices will also automatically stop. 

For any commodity or for that matter fuel as well, the price is the function of demand and supply. If the price is de-controlled, the consumers will have to pay the prevailing market price. The high price of the fuel can only be the deterrent for people, for using it reasonably. So let the market force determine the price we pay for the fuel. Our contribution in this direction is to minimize our dependency on fossil fuel. 

Just the crude oil price rise in the world market cannot be the excuse for the fuel price hike in India. There are so many other dynamics behind the screen that is working out the formulae. So what is the work around? We cannot keep the fuel price under control as the international price increases and we are net importers of oil. So let the people who can afford the luxury vehicles and life styles, pay the price. The subsidies should come only to the people who really need cheap fuel for their day to day life. 

So what can the common man do? We can save petrol. Every drop matters. We can avoid using bikes or scooters unless really required. We will only help our health and environment by taking the small walk or using a bicycle to go to work. One shouldn’t feel offended by others’ comments of being greedy, if that is helping the cause of saving a few drops of petrol. After all, every drop saved is a drop generated. 

Various news articles on internet

          Author doesn’t claim the accuracy of data, data points are only for substantiating the arguments. 



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