Critics who are quick to discredit the Government each time it raises excise duties on fuel have never credited the Government for ensuring that despite India facing one of the most severe droughts ever in 2015-16, it is solely due to the BJP dispensation that food inflation in the last four years has been kept in check
The BJP-led NDA Government invited unwarranted criticism when it raised prices by 10 paise and 11 paise per litre, for petrol and diesel on April 2. Post this, petrol in the National Capital rose to Rs 73.83 per litre and diesel ro Rs 64.69 per litre. Critics, especially lobbies with vested interests, have conveniently forgotten that as recently as October 4, 2017, excise duty on petrol and diesel were reduced by more than two rupees per litre, post which, the price of petrol fell from Rs 70.88 to Rs 68.38 per litre and that of diesel fell from Rs 59.14 to Rs 56.89 per litre. let it also be told that these excise duty cuts cost the Government more than Rs 35,000 crore in revenues. However, large sections of an ignorant Opposition that is crying hoarse about how the Government should have desisted from raising duties now, was blissfully mute then!
The moot point here is: local petrol and diesel prices do not move directly in tandem with internatonal crude oil prices. There are various factors that determine how much you and me pay at the pump. A small factual example will best illustrate this: Between June and October 2017, international Brent crude oil price rose by a solid 24 per cent, from $46.37 per barrel to $57.51 per barrel. However, the price of petrol in Delhi rose by a mere 5.93 per cent from Rs 64.55 per litre to Rs 68.38 per litre. Similarly, diesel price rose by just 5.43 per cent from Rs 53.96 per litre to Rs 56.89 per litre.
How many leaders in the Opposition and left-leaning editors at media houses gave the Modi Government the credit for the fact that even as global crude prices went up by a whopping 24 per cent between June and October 2017, locally, price rise in petrol and diesel was contained at less than six per centIJ local fuel prices have in the meanwhile risen by a far lower percentage in the said period. Irrespective of which time-frame you look at, victory of Modinomics over inflation has been resoundingly decisive.
A leading financial daily recently noted that excise duties on fuel were raised nine times between November 2014 and January 2016, insinuating that enough was not being done to control fuel inflation. The same daily, however, chose to ignore the fact that under a corrupt Congress-led UPA, retail inflation in November 2013 was at a 23 month high at 11.2 per cent, with food inflation at 14 per cent and rural inflation at 11.7 per cent. Again, the same daily chose not to mention that in November 2014, retail inflation had fallen to 4.3 per cent and food inflation to 3.1 per cent. What is even more commendable is the fact that proactive inflation management by the Modi dispensation saw retail inflation falling to a 37 month low of 3.17 per cent in January 2017, led by a steep fall in food inflation to a mere 0.53 per cent, driven by negative vegetable inflation of 15.62 per cent and negative pulses inflation of 6.62 per cent.
Critics who are quick to discredit the Government each time it raises excise duties on fuel have never credited the Government for ensuring that despite India facing one of the most severe droughts ever in 2015-16, that affected 330 million people in 2.5 lakh villages, in 266 districts, across 11 States, it is solely due to the BJP dispensation that, food inflation in the last four years has been kept in check. Retail and wholesale food inflation in February 2018, stood at a meagre 3.2 per cent and 0.8 per cent. Coming back to fuel inflation, what ignoramuses need to know is, Retail Selling Price (RSP) of petrol and diesel is a function of various factors, namely, excise duty, State VAT, BS-IV premium, marketing cost and of course, dealer/ retailer margins which are incidentally, specific costs which do not necessarily fall with falling international prices. The rupee-dollar exchange rate also plays a significant role in determining the retail rates of petrol and diesel. Public sector oil marketing companies like IOC, HPCl and BPCl apply the trade parity method to arrive at RSP.
Trade Price Parity, followed by Indian PSU retailers, is more consumer-friendly than Export Price Parity method that is used by many global oil retailers worldwide to make windfall gains. Another important point worth mentioning here is that 40 paise from every additional 100 paise hike in RSP, goes to the kitty of States. A dominant part of the balance 60 paise is also used by the Central Government to finance various developmental projects across different States.
As honest tax payers, we want accountability for every rupee spent by the Government and again, rightfully so. But in doing so, let us not forget to give credit, where due.The Government has shown exemplary judiciousness in spending every penny it gets as revenue, via taxes or excise duties. For instance, despite becoming a State in 1972, it was only 34 years hence in 2016 that,Tripura got something as basic as a broad gauge rail line from lumding to Agartala.
Next time we whine about that extra 10 paise per litre that we have to cough up as excise duty, let us also remember this 10 paise has contributed in ensuring that highway construction in four years of the Modi dispensation has doubled to 27 km a day for the first time.
Again, Indians bought over three million cars and fuel guzzling SUVs in 2017, the highest in four years. Point is, if demand outstrips supply, prices will rise and hence, trolling the Government for a marginal rise in excise duty is surely out of context. The aspirational middle-class also needs to understand a large part of ‘Bharat’, uses auto rickshaws and taxis that run on CNG.
CNG prices have dropped sharply by 24 per cent from Rs 50/Kg in December 2013 to Rs 38/Kg, in Delhi in April 2018. Frankly speaking, if you criticise the Modi Government for a rise in petrol and diesel prices, equally, you also need to applaud it each time you hitch an auto ride or hail a taxi. Don’t forget the humble auto rickshaws in India take more than 11 crore people to their destination every day. As they say, you cannot have your cake and eat it too!
(The writer is an Economist & Chief Spokesperson for BJP, Mumbai)