A meritless policy
Contrasting global decline in oil prices during the pandemic, India has seen a sharp increase in diesel and petrol rates, a policy which will slow financial recovery
Diverted with so many events around, the Indian public stands absorbed and hard-pressed with the hike in petrol & diesel prices, yet again.
Petrol or diesel price, in India, is a touchy subject and while we are collectively fighting repercussions of COVID-19 and its recovery process, we have the Government to give us more worries. While everyone has a confused, wandering mind, as to how the business and economy will upscale, there are border tensions going on too with our neighbouring nations. With such news and information around, the Government seems to have taken advantage of this, silently increasing petrol and diesel prices, with the consideration that this will go unnoticed.
On July 7, 2020, while petrol is priced at Rs 80.43, diesel is being priced at Rs 80.78 in the Capital for the very first time in our 'independent India'. We have no positive support to stabilise the micro economy of the households, nor the macroeconomy of the country as a whole. Diesel on May 1, 2020, was priced at Rs 62.29 per litre, and on June 1, 2020, it reached Rs 69.43.
That means that in the last twenty days, petrol has been hiked by Rs 9.66 per litre while diesel has been hiked by Rs. 11.63 per litre. All these hikes have been taking place in India, even when the international crude oil prices retreated all through these months while the pandemic affected the entire globe. The resultant supply excess led to price falls, and the countries still continue to worry about a potential second wave of the pandemic which may lead to such economic imbalances again.
The international crude oil price crashing to rarely seen levels should have helped India to significantly cut the import bill, check inflation, and boost revenue if the Government took advantage of the situation in a positive way for the benefit of the country. Crude oil sold for $116 per barrel in 2011. Even then, the Government controlled pricing in India, keeping petrol rates at Rs 58.37 per litre while all throughout April and May 2020, crude oil stood at a low of $21.04, yet the price hike raised the prices to Rs. 80.43 per litre for petrol and Rs 80.78 per litre for diesel as mentioned above. The price effect took a steep increase and since the last few months, has been adding to the financial pressure exerted on the rich, middle class and of course the poor. Ideally, crude prices falling internationally, and the fact that India imports over 80 per cent of its requirements, tell us that the country would have needed to shell out a lot less money to buy oil from abroad. Low oil prices can not only reduce India's import bills but it can also give a room to the Government to divert existing funds to priority areas while also putting less burden on the common man. Further, low petroleum and fuel costs also bring down energy prices, moderating the inflation rate. India being a net oil importer tends to gain immensely from an oil slump on its import bill.
This kind of hidden monetary gain via a tax on oil is not going to revitalise this nation, rather, it will add up to a bigger failure of the economy in the coming months.
Considering the strength in the oil-pricing sector for India, between 2004 to 2014, a decade where there was progressive taxation, yet hold on unnecessary price inflation, Narendra Modi, called it a failure, blaming the UPA. Today, petrol in India is the costliest in all of South Asia, and no one to be blame as the NDA can rest on its cushion support of COVID-19 repercussions and excuses. Globally, oil prices have fallen.
In 2012, the Prime Minister, Dr Manmohan Singh acknowledged the need to rationalise fuel prices. But, he affirmed and stated that at the same time, it would have to be ensured that the poor are shielded from the effect of such a rationalisation. Any change in fuel pricing is a political issue in India, and eventually, the consumers have to pay for the politics of oil. As a representative of not just the UPA but the country as a whole, he confirmed that to insulate the common man from the impact of rising oil prices, the Government shoulders a sizeable portion of the burden by pricing diesel, kerosene and domestic below their market price.
Yet, today we see a complete contrasting economic policy implication, which has sadly led to the common man being stranded and trying to cope up.
Why does it look like a scenario where only a few big names are being supported to grow in this country? There is no fair price mechanism in any sector, and of course, oil being the most important and the base for most economic calculations requires stability and justified pricing. With easy entry and exit norms for commercial coal auctions, the Government expects participation from Indian companies, and this is a new addition to diverting factors, to make industries and the public chase new developments.
What was being pointed out before 2014, versus what the NDA is actually practising, is so ironical. In the name of 'Make in India', a small set of companies, individuals and governments are growing.
To the layman as informational pieces, the Government has been proclaiming that 80 per cent of our fuel requirements are outsourced, and we are at the mercy of not only international market sources but also the strength of our currency. If this was the case, then International oil prices falling down over all these months should rather have been an advantage to us; but again, the Government's actions are inconsistent with what they have pronounced.
In such beleaguered times, It is unjust that over 80 per cent of India's small businesses expect to scale down, shut shop, or sell-off in the next six months. The ruling Government has not just failed to provide basics like food and shelter to the migrants but has also led to the failure of the educated resources of the country, while all kinds of businesses are suffering deeply. Now is precisely the time that India needs a fair Government which serves the people of the country.
Views expressed are personal