Opposition targets govt

While the Centre has so far resisted from making a decision to provide relief to the consumers from the rising fuel prices, Kerala Chief Minister Pinarayai Vijayan on Wednesday announced that the LDF government will cut petrol and diesel prices by Re 1 with effect from June 1. "Our state is not doing financially well. But our government has taken the decision to cut sales tax on fuel to effect a Re 1 reduction in petrol and diesel prices from June 1. This will cause a revenue loss of Rs 509 crore annually. This should be seen as our message to the Centre. Fuel prices cannot go up like this. They must slash prices so as to provide relief for the common man," Vijayan told reporters after the weekly Cabinet meeting. Though the Centre has said that it was working on a long-term solution to rising fuel prices, it has so far not explained what those measures are going to be.

Meanwhile, credit rating agency Moody's on Wednesday cut its forecast for India's GDP growth in 2018 to 7.3 per cent from 7.5 per cent earlier. "The Indian economy is in cyclical recovery led by both investment and consumption. However, higher oil prices and tighter financial conditions will weigh on the pace of acceleration. We expect GDP growth of about 7.3 per cent in 2018, down from our previous forecast of 7.5 per cent," the report said. India's GDP grew by 7.2 per cent in the third quarter, compared to China's 6.8 per cent during the quarter, making India the fastest economy in the world. The rising fuel prices have already hit the agricultural markets around the country, where prices of fruits and vegetables have already started showing the impact. Because of the hike in the price of petrol and diesel, the transportation cost of these highly perishable commodities has increased. The farmers who were already getting lower prices for their produce now have to bear an increased transportation cost. The situation is likely to escalate to an overall rise in the prices of most commodities, giving the opposition more ammunition to attack the government. This is not a good news for the Centre in an election year.

The Congress has already taken up the issue of fuel price hike and has been warning for a nationwide agitation. Other parties have also voiced their concerns and the people resorted to protests in some states including Odisha and West Bengal. Like the Kerala government, all of them want the Centre to cut the fuel prices. As per an estimate, if the oil prices stick to $80 a barrel in the international market, the government's subsidy to the oil sector will be in the range of Rs 35,000 crore, Rs 10,500 more than budgeted. Though the oil prices in the international market have come down to the mid-$60 a barrel after touching the $80 mark, the government does not want to interfere in the daily oil price mechanism which is linked directly to international oil prices. If it goes for a price cut to provide a relief to the consumers, it will have to either forego the taxes it has levied on the import of crude oil or subsidise the crude oil after purchasing it at a higher cost. Either way, it is going to lose a lot of money. For cutting the fuel prices by Re 1, the Kerala government has decided to cut the sales tax and take a revenue hit of Rs 509 crore annually. In a year when the government needs more money to spend on its favourite projects ahead of the Lok Sabha elections next year, the rising fuel prices are all set to eat into its revenue by forcing the government to take necessary measures to reduce the fuel prices.