The Hindu Business Line : Fuel pricing: Time for political parties to join hands

New Delhi, July 5 The July 1 decision of the UPA Government to increase the price of diesel by Rs 4 a litre and diesel by Rs 2 litre has predictably provoked the political reaction with Opposition parties staging a customary walkout on the opening day in Parliament before pleading for a roll-back of the hike.

The principal Opposition Party BJP even sarcastically termed the hike as ‘a noble thanksgiving’ by the ruling party as it had lowered the petro price prior to the elections and quickly retraced only to re-impose the increase soon after return to power once again.

Now that political parties have learnt the hard way that domestic fuel prices are hostage to global crude price movements, postponing biting the bullet when global prices are hardening is bound to aggravate the situation before long.

Surprisingly, the major industry lobbies such as the chambers of commerce and industry have been muted in their criticism stating that failure to act when global crude prices harden would only result in indebtedness of future generation.

This is so because the Government had to issue oil bonds to help cushion the oil marketing companies from bearing the brunt of under-recoveries under duress to bolster domestic users of fuels.

Lest the memories of parties should play truant to seek rollback on the latest hike in petro prices, official sources told Business Line here that between May 1996 and May 2004 (the United Front regime and the NDA regime) when the Indian basket of crude prices shot up from $18.01 a barrel to $36.09 a barrel, the retail selling price of petrol in Delhi went up by 99 per cent (from Rs 16.95 to Rs 33.71 a litre), that of diesel by 211 per cent (from Rs 6.99 to Rs 21.74 a litre), PDS kerosene by 258 per cent (from Rs 2.52 to Rs 9.01 a litre) and domestic LPG by 158 per cent (from Rs 93.80 to Rs 241.60 per cylinder).

In contrast, between May 2004 and June 29, 2009 (the first UPA regime and its second term start) when the Indian basket of imported crude price skyrocketed by only 91 per cent (from $36.09 to $69.06 a barrel including the phase of last July peak of $147 a barrel), the domestic retail selling price of petrol in Delhi went up by 20 per cent (from Rs 33.71 to Rs 40.62 a litre), that of diesel by 42 per cent (from Rs 21.74 to Rs 30.86 a litre), that of PDS kerosene by 2 per cent (from Rs 9.01 to Rs 9.22 a litre) and that of domestic LPG by 16 per cent (from Rs 241.60 to Rs 279.70 per litre).

Bipartisan approach

Instead of raising a chorus of protests when price of fuel is hiked, it is better that all political parties follow a bipartisan approach to a national and riveting issue such as energy pricing so that the dismantled administered pricing mechanism is actually dismantled and the price of fuels decontrolled to reflect the rising import cost.

Of course, the social cost of cushioning the poor using kerosene could be borne from budget and not the cost of auto fuel and domestic gas consumption when disposable income of people has increased.

The Petroleum Minister, Mr Murli Deora, was on record that the projected subsidy burden on not revising the retail price of PDS kerosene and LPG amounts to Rs 30,000 crore.

That is the reason why the latest Pre-Budget Economic Survey pitched for “decontrol of petrol and diesel prices so that buyers were conscious of the opportunity cost of oil imports and contribute their mite to economising on the use of refinery products”.

If the political parties still oppose the hike, they could persuade the State governments to rationalise the sales tax on diesel and petrol as suggested by Mr Deora in a recent letter to all State Chief Ministers with a view to reducing the harsh effect of rising global crude oil prices on the consumers.

It is interesting to note that the current rates of sales tax/VAT in various States/UTs range from a low of 18 per cent in the case of Orissa to a high of 30 per cent in Tamil Nadu in the case of petrol and 14.50 per cent in Jharkhand to a high of 26 per cent in Maharashtra in the case of diesel.

Energy experts contend that the time has come for the authorities to address the country’s opaque fuel pricing system, giving primacy to market-determined price signals over holding price in leash in an artificial manner that aggravates the exchequer’s fiscal burden. All political parties should band together in finding a viable way out of the complex fuel pricing issue to reduce subsidy burden and leave fiscal space for developmental programmes, besides de-carbonising the economy to ensure greener growth, they say.

More Stories on : Petroleum | Other States

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page