Ever since the Centre introduced daily revision in petrol and diesel prices in June this year, fuel prices have been fluctuating; but the change has predominantly been in one direction. As daily price variations are in just a few paise, the ballooning of rates has not evoked sharp reactions from consumers.
If the differences are measured over a week or a fortnight, the changes become apparent. The ulterior motive of oil companies behind their decision to switch to a daily matrix was to obfuscate the price pinch. Bowing to public pressure, the Centre last month reduced the excise load on petrol and diesel prices by Rs2 per litre to moderate the relentless rise in fuel prices witnessed over the last three months.
Some states also followed suit and cut value added tax on petroleum products to cushion the rising prices and to soothe the frayed nerves of consumers.
Earlier this week, some research houses predicted a sharp spike in petrol and diesel rates in the near to medium terms. If their calculations come true, petrol will breach Rs80 per litre while diesel price will cross Rs70. A sharp rise in the price of Brent Crude is said to be the reason for the prospective spike in the retail prices of the fuels.
The government should not allow oil companies to effect a sharp rise in fuel prices. Although imports account for more than 80 per cent of India’s total fuel needs, the ratio of Brent in the crude import basket is just 28 per cent. International crude prices have firmed up to $60 a barrel. In rupee terms, the price of Indian basket has inched up to 3,849.43.
International crude had remained subdued for nearly three years before its prices started moving up a week back. It had come down to as low as $40 in 2015 and ruled below $50 until recently. The government never thought it fit to pass on the benefits it accrued from low international crude rates to customers.
The drop in oil price from $100 to less than $40 was not passed on to the consumers. Rather unethically, it kept skimming the gains from lower crude prices. It had not only retained retail prices of petrol and diesel but also went on jacking up excise on petroleum products. The Centre had been consistently hiking excise and other levies to fatten its tax kitty. The interest of consumers was at the bottom of its priorities.
People suffered from higher petroleum prices at a time when they would have been paying much less. The common man still has to pay very high price at the pump, although international oil prices have fallen off the cliff.
If the central government had not increased excise over the last two years, then diesel and petrol prices would have been lower by Rs15 and Rs13 per litre respectively. Now when there is a possibility of rate spike owing to a variety of global factors, oil companies should absorb the shock and should not pass the pressure on to consumers.
As petrol and diesel prices have been deregulated in the country, their rates ought to be influenced only by extraneous factors such as changes in exchange rates and international crude prices. But that is not what is happening.
The government has continued to skim the gains from both fall in international crude prices and appreciation in exchange rates. This had continued for three years until five months ago when the daily price revision was introduced.
If at all international crude rates go beyond $65 as some research houses have predicted, the Centre should bring down excise to shield consumers from its cascading effect and must desist from adding to the consumers’ burden. This will also help keep inflation under leash allowing the Reserve Bank of India to consider easing rates. It is time now for the Centre to pay back.