The road transport sector is against diesel price hikes per se , but we understand that the finances of oil marketing companies do not really allow for that option.
Given this framework, the Kirit Parikh report’s recommendation in favour of a one-time increase, as against incremental hikes, seems a sensible one. We shall explain why.
To put matters in perspective, it is important to appreciate that diesel is the single biggest input cost for the road transport sector. Any increase in diesel price, whether incremental or steep, has a direct and indirect impact.
In direct terms, the amount spent on diesel increases.
In indirect terms, the cost of tyres, spares, labour and establishment expenses rises. So, while diesel price hikes are generally unwelcome, we also see some merit in the Government’s need to raise diesel prices in order to address the under-recoveries of oil marketing companies. Hence, our endeavour is to minimise the inflationary impact of the diesel hike.
Keeping this in mind, we are of the view that small, incremental increases in diesel price, which have been in force since the start of this year, are worse for the sector than a one-time hike.
The truck operator bears the brunt of the increase, as frequent changes in the contractual agreement (between truckers and buyers) cannot be effected every month. It is important to note that most of the business is done on contractual basis.
These incremental increases are killing truck operators’ business, in which 85 per cent of the fleet operators own just one or two trucks. We have, therefore, asked for an annual or semi-annual increase in diesel prices. In such an event, at least the operating cost can be recovered.
The Kirit Parikh panel’s suggestion of Rs 5/litre increase in diesel price at least opens up the possibility of reversing the ruinous trend of this year.
While we transporters understand the Government’s compulsions, the onus is on the Government to come up with other options to mitigate the burden of the hike. One such option is to reduce the taxes on diesel and introduce a ceiling for the same.
We have called for a reduction in Customs duty and VAT imposed by states on diesel, as these taxes account for about 50 per cent of the diesel prices.
There should be a uniform diesel price across the country to avoid diversion of revenue to a State with a lower rate of levies. Commercial vehicles tend to fill their tanks in states where diesel rates are lower.
(The authors are President and Secretary-General, respectively, of All India Motor Transport Congress.)
Read also: >Should diesel prices be hiked incrementally? Yes