Free Press Journal

BJP government sleep walks into UPA era as petrol, diesel prices touch all-time highs

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New Delhi: The BJP government seems to be sleep walking into the UPA era of high petrol prices, oblivious to the fact that rising prices of petrol and diesel were among the reasons that brought down the UPA government of Manmohan Singh.

In May 2012, the UPA government had approved the steepest ever hike in petrol prices across the country. Petrol price in New Delhi had then reached Rs 73.18 a litre. On Sunday, petrol was available at Rs 76.24 in New Delhi and at Rs 84.07/litre in Mumbai. Caught in its own false assumptions about the future, the government seems to be also blind to the effect this is having on core inflation and GDP numbers.

With global prices rising quickly, only excise can be reduced to cushion the blow, feel economists. But the fiscal situation may not permit such generosity. The fiscal situation is also getting stretched, especially at the state level due to extra fiscal obligations. These include farm loan waivers and additional burden of running centrally sponsored schemes. Sunday was the 7th consecutive day of price spike since oil PSUs on May 14 resumed daily price revision after a 19-day pre-Karnataka poll break.


As petrol price climbed to a new high, Mumbaikars were fretting and fuming in the social media, more so since they cough up more for fuels than their counterparts in other metros. Economic Affairs Secretary Subhash Chandra Garg refuses to say whether the government will cut excise duty on auto fuel to ease the burden on consumers. The government is watching the situation developing from oil prices hitting $80 a barrel — the highest since November 2014, and adequate steps will be taken, is all he said without elaborating. “Just watch,” was his cryptic comment when pressed for a response.

A fair share of the blame for higher excise duties lies at the doorstep of the Centre. The BJP government has raised excise duty nine times — totalling Rs 11.77 per litre on petrol and Rs 13.47 on diesel — between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.

It is not as if the Centre can’t absorb the higher cost. While Karnataka was in poll mode, there was a freeze on oil prices, even though international crude prices were spurting. Result: In the nearly 19-day freeze, Oil PSUs are estimated to have lost about Rs 500 crore by absorbing the higher cost resulting from the spike in international oil rates and fall in rupee against the US dollar. Union Petroleum and Natural Gas Minister Dharmendra Pradhan has, however, assured citizens that the government will soon find a solution to tackle the situation.

Talking to media, Pradhan said, “I accept that citizens of India, especially the middle-class, has to suffer a lot due to price hike of oil. It is not in our hand. There is less production of oil in OPEC countries. The Indian government will soon come out with a solution.”