Hike in Petrol Price

Government has recently hiked petrol price by Rs. 7.55 –a- litre.  A steep hike of 10%.  The actual impact to consumer is the tune of Rs. 8.00-a- litre.  The reasons given for such hike is that the oil companies are bleeding and their reserves have been eroded because of   mounting losses.  In India though the administered  prices were dismantled long back yet Public sector oil companies are controlled by the government therefore government dictate the price.   In view of this pricing policy, price based on market mechanism only remains on  the papers.  But the moot question is whether government justified further  burdening middle class who is already overloaded  with plethora of taxes?

Government has itself accepted that there is policy paralysis in India because of coalition structure.    It waited first for assembly elections in some of the states to over and then  parliament session to close, to blow this lid of hiking petrol price.  Further it had  extreme fear psychosis from West Bengal Didi  Mamta who will always flay its tantrum and act as a opposition leader to halts government for pursuing its policy.    Government found new love in Lalu Prasad and   Mulayam Singh and mustard courage to announce steep hike in petrol prices.  Now question is why only petrol prices?  Why not that of diesel, Kerosene and LPG?

There is huge cross subsidization of diesel, Kerosene and LPG.  If there is reasonable hike in all the three, then definitely petrol price will alone not suffer such a  casualty.    Every year government gives subsidy to the extent of Rs. 1,90,000 crore on account of diesel, LPG and Kerosene.  Government has its own logic.  If LPG price is increased, then common man will suffer.  If diesel price is increased, then the freight cost will go up and there will be inflationary pressure in the economy. 

But the fact lies somewhere else.  The world over practically there is no difference in prices of  MS and diesel.  A major component in fuel prices is taxes.  A consumer has to pay bear custom duty, excise duty and VAT.  In some states  like Punjab and Haryana, the VAT is as high as 40%.  The oil companies are holy cows suffering from operational inefficiencies, corruption, indecisiveness, nepotism and ultimately this leads to higher cost of production and poor consumer is made to suffer.  Government is charging such astronomical  VAT to finance its resources.  But what kind of resources ?  Government does not have money to pay the salary to school teacher, maintenance of its hospitals, cleaning of roads, providing potable water to its farmers  for health of citizen.    But see the contrast.     It has resources to provide the best of luxuries to its ministers, bureaucrats, police officers, and VIPs.  In Punjab alone, the Chief Minister and Deputy Chief Minister does not travel without a fleet of atleast 25 cars, surrounded by not less than 100 commandoes and so is the case with other ministers and their deputies.  Why this extravaganza?  Perhaps our democracy has become feudalistic type of governance.    The great nations and great leaders do not indulge in this kind of hypocrisy. 

However, there is a ray of hope.  “When there is will, there is a way”.  While giving reply to Parliament during discussion on Lokpal Bill, Finance Minister Pranav Mukherjee said, “Corruption cannot be routed by blow of a whistle, but government will take concrete step by making public institution more and more transparent supported by technology.  Refund of Income tax, Making of Passport  are such efforts in that direction.”   This leads us to believe that if government takes effective steps burden on common man be minimized  if not wholly mitigated. 

How can we achieve the goal of helping poor without disturbing economy.  The scheme of ‘Adhar’ is one step in that direction.   A few concrete steps like stop subsidizing the product, instead  give subsidy  by way of cash in the bank account of poor as per consumption norms, hike in excise duty in diesel run cars and SUVs, stop unproductive expenditure, reassess threat perception and cut expenditure on so called VIPs, strong anti corruption measures like Lok Pal Bill or equivalent, strong action on tax evasion are some of the steps which government can take to bring the economy on track.   

But surely, putting common man to suffer by hiking unprecedented petrol price does not go well with anybody when government has other options, like reducing excise duty, VAT and stopping cross subsidization.