The hike addresses neither the failing health of the finances of the Government nor that of the oil marketing companies.
By ‘allowing' retail prices of petrol to go up by Rs 7.5-8 per litre, without touching diesel at all, the Government may end up further incentivising already inefficient and iniquitous patterns of fuel consumption. Diesel is the most burnt fuel in India, with an annual consumption of around 65 million tonnes, which is more than four times that of petrol. Moreover, its sales, even from this higher base, rose by almost five million tonnes in 2011-12, compared with less than a million tonnes in the case of petrol. From this, it should be obvious that the country – which imports the bulk of its oil requirements and is struggling to finance these – ought to be restraining the consumption of diesel relative to other fuels. What the Government has been doing is quite the opposite. The latest increase announced by oil marketing companies (OMC) would translate into a price differential of over Rs 32 a litre between petrol and diesel now, as against hardly Rs 13 five years ago.
No wonder, then, diesel is being increasingly preferred by car-owners and even industries that normally use fuel oil or LSHS (low sulphur heavy stock) to fire their boilers and furnaces. An indication of it is the fact that one out of every two cars sold today runs on diesel, whereas this ratio was one-in-four a couple of years back. Similarly, it is instructive to note that fuel oil/LSHS consumption actually fell by 6.5 per cent in 2011-12. Inefficiency apart, there is also an inequity component here. Petrol is no longer today a rich man's fuel, as it is largely being used in two-wheelers, auto-rickshaws or sub-1,000 cc cars driven by not-so-affluent sections. On the other hand, a sedan owner burning 150 litres of petrol a month would save a cool Rs 4,800 now by switching to diesel – and manage to log an extra 600-700 km due to better engine mileage as well! In other words, the subsidy on a fuel, originally intended for farmers, truckers and public transport utilities, is going more and more to those least deserving of such taxpayer empathy.
The current price hike also does not address in any serious manner, the twin problems of a fast depreciating rupee and global crude prices that are still far from exhibiting any definite signs of softening. Both have combined to wreak havoc on the finances of the OMCs and the Government's own subsidy bill, which is already out of sync with its budget estimates. It's high time the Government recognises these and, as a first step, arrest the widening consumption distortions in transportation fuels. This, it can by suitably hiking diesel prices and, perhaps, even reducing the excise burden on petrol to make it competitive vis-à-vis the former. Although petrol is technically a deregulated fuel, in practice, it is not. Even if the OMCs are given full freedom to fix prices, it does not really amount to deregulation, so long as petrol imports continue to be canalised, duties remain high, and there aren't any independent fuel retailers in the country. We need all of this not only for petrol, but also for diesel, so that consumers get to experience true deregulation and choose fuels based on their intrinsic calorific value or relative burning efficiency.
Keywords: hike in petrol prices, failing health of the finances, oil marketing companies, fuel consumption, diesel
Comments:
This is again an instance of putting the cart before the horse and molly-coddling an ignorant people that the government is protecting their interests whereas true interest of the people lies in telling them the truth about fuels and its impact on the economy.An added problem now is a fast depreciating rupee and no amount of tinkering with the price of petrol alone will help to solve it.About deregulation,this one too is entangled in the larger question of allowing liberalisation in as many economic activities as possible and a strange sense of 'deja vu'of the sixties and seventies is not un-natural.
Chidambaram Kudiarasu
81/10 Muthukrishnapuram 6th Street
Tuticorin628001
AGREE.
What makes this lopsided policy even worse is that when populist pressures force either the Center or States to Reduce Taxes their Finances will come under pressure and WORSEN the OVERALL FISCAL DEFICITS of both the States as well as the Center without any compensating gain elsewhere
THOUGH WHAT IS SAID IS TRUE,GOVT IS AFRAID THAT IF DIESEL PRICE IS INCREASED IT WILL BE REFLECTED IN PRICES OF COMMODITIES FUELLING MORE PERMANENT INFLATION IN CONSUMER GOODS MANUFACTURED OR OTHERWISE.BESIDES ALL TRANSPORTS WILL HIKE THE TARIFF FUELLING ANOTHER DISENCHANTMENT OF THE PUBLIC. THEREFORE INCREASE IN PETROL PRICE IS SAFER FOR GOVT LOOKING AT ELECTION YEAR AROUND THE CORNER.NEVERTHELESS,THERE SHOULD BE CONSCIOUS EFFORTS TO REDUCE CONSUMPTION OF OIL IN ALL FIELDS LIKE FAMILY PLANNING DRIVE TO ENSURE BETTER TOMORROW.IS THERE ANYONE IN GOVT WHO CAN THINK OF NEW WAYS?
You still don't see the pattern, Mr Bhandari. Government after Government, it just exchanges the power like that of an olympic torch. Essentially, all politicians are the same and they are opulent. So, it is a family matter, like you protect your own family, they protect the interest of all members of Parliament. You look at their intelligence. Today they are in one party, the next day, they shift stance. But they continue to bein power either staying inside the Government or outside. There is no one to think what you intend to think. It is left to us, people like you and me.... Think again, if what you say is right, all the commodities should have a price of 2008 levels. But without increasing the diesel/transportation, every commodity increased at least 200% from their 2007 levels? Do you think the Government is thinking? Here is the fact: There is no Government at all.
(1) Current policy of increasing only the petrol price in fits and starts should be replaced by a rational approach to pricing of all petroleum products. (2) There is an urgent need to discuss taxation policies for petroleum products with the State governments, and discuss whether ad valorem duties are to be replaced by specific duties and taxes. (3) If the govt. cannot afford to raise prices of diesel, kerosene and LPG for political reasons, to begin with it can certainly impose additional excise duty on diesel driven cars and sports utility vehicles. (4) All these years, the State governments have benefited by way of continuous increase in sales tax revenue as a result of petrol price increases by the Central govt., or the oil companies. They have, however, blamed the Central govt. for every price increase but merrily enjoyed more tax revenue from such increases. People should be given information about this and how the crude price and value of Rupee decides the petrol price.
Did you find out the impact on increase in diesel prices and an excise reduction in petrol prices to essential commodities? It is acceptable that an affluent person can buy diesel for his luxury car while the lesser than 1000cc owning person can't for his petrol engine. But a raise in diesel prices will impact the local transport users, grocery items vis-a-vis other items such as steel, cement etc. Your article is succinct but incomplete.
The recent advances in diesel engine technology has made diesel car performance as good as petrol cars. Also, diesel engines are more fuel efficient than petrol by atleast 25%. handling diesel is easier as it does not vaporise as fast as petrol and is less inflammable.Petrol car owners prefer petrol as it gives a superior driving experience and nothing wrong of they pay for it.
Finance Minister says Petrol prices were enhanced by Oil companies and Government has nothing to do because companies are paying increased prices of crude oil in international market. The crude oil business is in the hands of speculators who increase and decrease the crude oil prices at their whims.
Cannot agree with author of the above article where it says"ought to be restraining the consumption of diesel relative to other fuels. What the Government has been doing is quite the opposite"". Diesel is most important fuel on which county's economic activity depends. Any increase in diesel prices will have cascading effect on the lives of people and on whole economy.
Why should we need so many oil companies..? is it not enough to have one or max2 when they produce same oil have a same price, same specification and same quality? So at first, let there be one or 2 oil companies and one or two private oil companies so that there could be competition.
If the price increase was inevitable, the Govt should have increase the price marginally with some gap of time.A sudden high increase at a time when inflation is so high, seems that there the Govt is not functioning properly.
The Govt is fooling the people by informing that it is the oil companies that has increased the prices!!
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