Fuel Price

While I am writing this blog, the petrol price in Mumbai has almost touched Rs 90 per litre, which is costliest among 4 Metro cities.

Some of the people are cursing the present Govt, and saying that same people, who are sitting in Govt  now, protested against rising prices of  Petroleum products, when they were in opposition. Plus these people are adding that during UPA there was not much petrol rise even when crude oil prices increased considerably. These people are correct some what, but they are forgetting there was completely different scenario when UPA was in power. There are some points which are to kept in mind before starting this blame game

Blame No.1- During UPA time price hike was not that much even if the global oil prices were rising.

Fact: Now what UPA govt did  Raised Rs 1.44 lakh crore in terms of Oil bonds to by pass the impact of crude oil price increase to lower the losses of oil companies and kept the price increase at modest level between Rs 3 to 5 per litre. Although still for some times in 2013 petrol price touched Rs 83 per litre in Mumbai. Ex PM Manmohan Singh said that they were not doing right thing as some other govt in future has to pay these oil bonds with interest. On June 4,2008 he said ” However I would like the nation to remember that issuing bonds and loading deficit on oil companies is not a permanent solution, we are only passing our burden to future generation, who will have to repay this debt.” In my opinion, think of UPA paying for oil with post dated cheque, only worse because when you issue bond, you have to pay interest on it, so it is more like a credit card. May be UPA issued these bonds as a burden on the country knowing very well  that when the time comes to pay these bonds they will not be in power. Now this money  has to be paid by Modi govt with interest of Rs 70,00o Cr and  they have paid the same. The amount of repayment of approx Rs 2.14 lakh Crore is almost equal to Central Excise collection of one year (before GST ).

While Modi govt has been paying UPA’s credit card bill, and Congress party has been on the street asking why PM is not willing to reduce oil prices. Think of this way, a  family head mortgages the ancestral property to pay for his vice’s debt and runs away one day, leaving his sons and daughters to pay his debt. Only worse is that when the debt is repaid by them, the family head returns back and asserts his right  to ownership of that ancestral property.

Blame No.2- NDA govt did not passed the benefit of reduced crude oil prices (when it happened) to consumers instead it increased the central Excise and State VAT.

Fact: Govt did not passed benefit of reduced crude prices in 2014, as it wanted to bring the habit of financial discipline in economy. Govt used additional tax collected in for the infra projects like ports , roads and air connectivity. Along with this various social security schemes were also introduced Ujwalla Yojana (free LPG connection to poor families), Ujala (LED bulb distribution) more than 30 Cr LED bulbs were distributed, which resulted in savings of Rs 16,000 Cr.

UPA  govt were having high deficit, unpaid oil bills, gulped over Rs 20 lakh Cr in scams, and economy was doomed, this is how it is different from the protest of opposition at that time. All things are in India’s favour now, be it inflation. FDI, Forex reserve, except for falling Rs which is due to US- China trade war and increasing crude oil prices.

Now I am giving you the petrol prices in various countries, when the price of Petrol in Mumbai was over Rs 83 per litre:  all the prices mentioned below are converted to Indian Rs per litre

China– 81,  Morocco- 81.5,  Canada– 82, Cuba– 86.5, Jamaica– 87,             Japan-89.5,  Turkey–92,  Poland– 94.5, Yemen 95,     Zimbabwe– 95,  Romania–98.5, Hungary –99.5, South Korea–100.5, Jordan– 101,  Czech Republic– 101, Serbia –101, Spain–106,  Slovakia– 110, New Zealand -111, Switzerland –111, Singapore–112, Germany–116,  UK–116.5, Belgium– 118.5,  France-125, Sweeden–126, Portugal–127,  Israel-127.5. Italy–129, Denmark–132, holland– 134, Hong Kong–145.

All the above countries are importing crude oil like India. It is not only India, which is being affected by increase in crude oil prices, all the countries in the world are affected by the same. You will notice from the above that in the list there are many developed nation, where the petrol price is even higher then India. Agreed there are few third world/Asian countries where petrol might be cheaper than India, but in their case the govt is subsiding the same.

The earlier govt of UPA preferred to give subsidies in terms of freebies and at the back door used to take away the same in terms of increased financial burden and ultimately putting interest burden on Indian Govt to repay the same. And the present govt is doing what is right for the country and not appeasing people for Vote bank Politics.

Petrol/Diesel prices can be brought down provided all the state govts and central govt agree to bring the fuel price under the ambit of GST, but no one is willing to bell this cat as the major chunk of Central and state Govts’ revenue is generated through various taxes on Petroleum products. Otherwise both the Central and State Govts have to reduce their taxes on the Petroleum products and which will result in deficit financing, which is equivalent to providing subsidies to petroleum products. This will  affect the spending on the infra & development projects.

So friends what you say in this matter.

Please give your views/comments/feed backs on this blog.

Anil Malik

Mumbai, India

17th Sept 2018.