Millennium Post

In public interest

In public interest

Ever since global crude prices crashed, it has been an interesting subject of deliberation whether the full benefit should reach the consumer, or be confined to the national exchequer. The latter part holds true already as India imports more than 83 per cent of its crude requirement, paying more than $100 billion each year. Both the foreign exchange rates and taxes on crude oil contribute to holding the benefit from reaching the masses. A depreciated rupee against the dollar makes it difficult for India to realise the cream benefit of crude price cuts, majorly since India has to pay in dollar equivalent for those barrels of oil. Hiked taxes on oil — almost half of the price of petrol — means that the prices of petrol and diesel remain visibly unchanged for consumers, barring meagre cuts of few paise. Similar to its 2015 measure when the price of crude had fallen to $35.68 per barrel yet the petrol cost nearly Rs 60, even today when the global crude price has fallen to $34.70 (as of March 11), petrol hovers around Rs 70. The Rs 3 per litre hiked excise on both petrol and diesel is like a regulator which while ensuring stable fuel prices that have been prevailing in the economy, allows for additional revenue. Even on previous occasions, similar regulation of prices has allowed the national exchequer to amass hefty revenue. Between November 2014 and January 2016, the government raised excise duty on petrol and diesel nine times while reacting to plummets in global crude prices. The revenue from this exercise is, in fact, India's share of the wealth that it willingly spends to procure global crude. As a socialist democracy, it is India's commitment to utilising these revenue gains in pursuing welfare aims. True, the direct transfer of benefit as the AAP government claimed is not being done. Petrol prices are still hovering near Rs 70 when they can be halved. But, within the tenets of India's democratic polity, it is also true that the gains would be utilised for the welfare of the nation through infrastructure development and other related measures. So, ideally analysing, as a whole, India does benefit from the global slump in crude prices. Friction within OPEC over oil production in a pandemic year has indeed created space for some respite for a slowing Indian economy. But just as additional revenue can be utilised for welfare schemes, it can also be utilised for shortfalls elsewhere, say the glaring fiscal deficit or the never-ending crisis in the country's banking sector. How much of the same, then, reach the people is the question.

There is no doubt that the government has to manage its expenditures and revenue streams. But as it does that, taking cognisance of the slowdown is of significance. There is no doubt that the Indian economy is in a quagmire. Efforts from the central bank and the finance ministry have only served as band-aids to the greater crisis pervasive in the economy. India's GDP growth rate has plummeted to a six-year low and this indeed qualifies for a special economic situation. With rising NPAs, record-high unemployment, poor investments and not-so-great manufacturing prowess, there is an urgent requirement for a spark that can kickstart the economy. Depressed consumer sentiment will only affect purchases. To top it all, the Covid-19 pandemic has sent global markets in shock. Of course, the resounding impact is bound to hit Indian markets too with Sensex and Nifty indicators already meandering. At this stage, the much-touted tranquillity cannot be brought unless bold measures are taken. Throwing a regulator and safeguarding the additional revenues to tap on the opportunity of global price slashes is a good move but the government has the gigantic task of propelling the economy back to the high-growth trajectory. And, it is particularly difficult while internally combatting a non-curable epidemic. If fuel prices cannot fall despite such grim circumstances, the government must then ensure that it utilises the additional revenue to give back the money to people, and not in essence but in the most tangible of ways. The Modi administration must ensure that the benefit of global crude price cuts should reach the commoners, one way or another. Only then can the true objectives of our democratic aspirations can be realised. Any other agenda will mean a travesty of public mandate.

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