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Yet another expert panel, chaired by Kirit Parikh, has examined the pricing mechanism for petroleum products, with emphasis on diesel and LPG prices. The panel has recommended an increase of Rs 5/litre in diesel price and Rs 250/cylinder hike in LPG price to take care of under-recoveries of oil marketing companies (OMCs), to be followed by decontrol of diesel price.
A Rs 3-4/litre hike in diesel price has provoked almost half a dozen truck transport strikes nationwide.
Transporters argue that goods transport agents and truckers are unable to pass on the increase to consignor, impacting their viability. There has never been a rollback – full or partial – of diesel prices since November 1999, when the price was jacked up by Rs 3.61/litre on a base price of Rs 9.70/litre. Even so, agitating truck operators would negotiate an agreement with the government and call off their strike.
On September 13, 2012, the OMCs increased the diesel price by Rs 5/litre. Road transporters yet again announced their intent to go on a nationwide strike unless the hefty price hike was rolled back. On September 14, 2012, the apex body of road transporters in India announced a 15 per cent freight hike. The freight hike was almost thrice the impact of diesel cost on the truck rentals at that time on leading trunk routes.
The Competition Commission of India (CCI) is looking into restrictive trade practices of road transporters, following a complaint by the Indian Foundation of Transport Research and Training (IFTRT).
In January 2013, the government permitted the OMCs to go in for a monthly diesel price hike of Rs 0.50/litre (local VAT extra). As a result, in these 11 months, the cumulative diesel price hike has been 6.16/litre.There has been no agitation by transporters.
Interestingly, now the erstwhile adversaries — truckers and OMCs — are demanding hefty single diesel price hike to the tune of Rs 4-5/litre, claiming that they are unable to pass on these small hikes. By that logic, truckers should have been unable to pass on the increasing capital cost of vehicles, tyres, toll, crew salary, motor insurance, taxes and other highway (legal or illegal) expenses. They should have been out of business!
In the larger interest of OMCs, truckers and the economy, we could arrive at a middle-of-the-road solution – allowing OMCs to increase diesel prices by Re 1/litre every month, so that it helps OMCs neutralise under-recoveries and allows truckers to gradually pass on the cost impact of diesel to consignor — without, however, leaving scope for opportunistic increases in road freight charges and prices of essential commodities. Once the under recoveries are neutralised in next nine or 10 months, the diesel prices can be decontrolled.
(The author is Senior Fellow and Coordinator, IFTRT.)
Read also: >Should diesel prices be hiked incrementally? No
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