India And Its Oil Price Tragedy: Government Alone Must Not Be Blamed, We Are Equally Responsible

Posted on June 27, 2012 in Specials

By Mahitha Kasireddi:

Since May 30th all that I observed is that the radio jockeys have nothing else to talk but about the petrol prices, and good news, they have started giving away 5 liters of petrol as a gift to the winners of their shows. The anchors in news channels are discussing this issue so intensely as if nothing else is happening in the country. The critiques have found an apt situation to crack a new series of petrol-government jokes. The social media is filled with hate massages from public and not to forget the cartoons and pictures being shared to express anger.

Well, jokes apart. The already cribbing people about many things were woken up on the morning of May 30th with dismaying news of the sudden and biggest hike of Rs 7.54 per liter petrol. Thanks to the agitations carried out by the opposition and the Congress led coalition party which helped in urging the government to review the prices once again on June 2rd.

Usually when a major change occurs it is obvious to look around for someone to blame. I know everybody would say that it’s the government. But, my brothers and sisters it is essential for all of us take cognizance of the factors lying behind the change.

The three parties who have a hand behind the scenario of the price hike are the OMCs, the RBI, the Government and of course we the citizens. Will you agree if I say that you and I are also responsible for the hike that happened a few weeks ago? Do not be offended, I am not taking a pro-government stand.

Truth lies in the thin line drawn between for and against. Let’s see what each one has to say.

What the OMCs had to say?

First of all let me give you some statistics of the currency figures that the oil companies are churning or rather I should say loosing. Diesel is currently sold at a loss of Rs 15.35 a liter, Kerosene at Rs 32.98 per liter loss and Rs. 479 on the sale of every 14.2 kg domestic LPG cylinder.

The Three public sectors firms have together lost Rs 138.541 crore on 2011-12 and projected to be going to loose an astronomical amount of Rs. 193.880 crore.

They have been making themselves heard continuously from the past two months and lastly have also threatened the government of increasing the prices if they don’t either cancel the taxes imposed on them or provide subsidies.

What the government had to say?

Due to the latest development in the petrol prices, the already unhappy UPA has been labeled ‘pro-rich’. But, sadly the poor government is left with absolutely no option due to the miserable performance of the rupee against dollar lately. By increasing the petrol prices the government has partially attended to the problems of the oil companies. After all they cannot be allowed to continue longer in the red.

As we know that the government has done a second review to the prices of petrol on June 2nd cutting down by Rs 2.04, and now recently by Rs. 4. This was possible due to the revision of the rupee position.

What the RBI had to say?

How many of you understand inflation? It is one baffling term in economics and you need to do some study to get a picture of it. The general understanding is that a rise in price of all the basic commodities is called inflation. The economists have a better picture than us.

The RBI has insisted that the government should increase petrol prices as it would lead to a healthy inflation which in a long run, that is in about 6-8 years, will help in bringing about a sustainable growth in the economy.

The reason why the diesel prices are untouched is that the major transportation of food and all basic commodities is done through heavy vehicles like lorries which run on diesel. If diesel prices go up then the burden will directly fall on the common man. So, this is not bad, is it?

How are you and I responsible?

For a while let us all stop being hypocritical and confess to some details. How many of us take out our cars, bikes and scootys to travel to destinations which are less than half a kilometer?

Review the number of times you took out your vehicles when it was not that necessary at all. How about adopting some petrol saving measures? How many of you have sincerely put your cars in off mode while stuck in traffic for long hours? We are forced to use the oil resources till the last drop thus leaving nothing for the posterity.

Talking of cars which have a capacity of at least four people are driven by a single person adding to traffic and pollution on the road. Luxury makes us lazy. Imagine if all the single person carrying cars can be removed from the road by shifting them to public transport.

What is wrong in using the public transport, after all we are paying taxes.

Have any of you thought about using a cycle, at least for short distances, like to your collage? I know, we are so damn meager in our thoughts and attitude that we can’t allow others to make fun of us. All of us are living in the same environment and it is each one’s responsibility to make this place a better place to live.

We should all aim for a pollution free environment. By increasing fuel prices the government is silently promoting the GO GREEN movement.

I say that the prices should always be up so that it would reduce the consumption rate of petrol and help in saving some for future.

Is petrol in India really the costliest?

To help you understand here is some data:

Country Price in Rs/litre
Pakistan 59/-
China 72/-
Nepal 75/-
Australia 78/-
Japan 94/-
Hongkong 108/-
UK 120/-

Actually, I could have concluded here but I do not want to dilute your brain with a one sided opinion. All this was happening on one side of the wall I would also like to project the other side.

No doubt the rupee’s depreciation following the euro zone debt crisis has caused all the chaos. It is the government’s responsibility to take measures to improve its performance.

In regard of the petrol prices, the government as I said is not totally at fault but in a way it is responsible. The main reason the public and the opposition were agitated is that in 2011-12 the prices have already been reviewed five times and this was an exhorbitant rise. The OMCs have been pressing the government on this issue frequently but the government paid a deaf ear. This had to happen anytime as a result of not acting at the right time. A periodic revise in the prices would have been better than throwing the burden all at once.

Bad Public Transport

How many of us are satisfied with the public transport facilities? Once we opt for going by a bus we should also be prepared to spend more time on travelling unlike when we have our own vehicle. The government needs to spend more on the transport infrastructure in order to increase flexibility and speed.

Why only “aam admi”?

The burden of the rise in petrol prices has to be borne not by the ministers who use the government vehicles less for official purposes and more for personal things like picking their children from school or for going shopping with family, not by the ministers who travel foreign countries on official duty but majority of the times when it is was not that necessary. The burden has to be borne by the aam admi.

We are like non-combatants here.

After aggregating the per liter cost of crude oil, processing cost, dealer commission, overhead and transport cost, the original price of petrol would amount to Rs 45 and the remainder is the result of various duties and taxes imposed by the government. The OMCs pay a Rs 14 excise duties and Rs 18 VAT totaling up to Rs 32 per liter. Coming to a bad end, today, the price per liter petrol in major cities is not less than Rs 73.(approx). Adding the new rise of Rs 7.54 per liter, it costs at least Rs 80 per liter.

Why can’t the state share the burden too? In our country where there are states like Andra Pradesh which taxes at a highest rate of about 34% there are also states like Uttarakhand, Kerala and Goa where there is absolutely no tax. The state governments should relieve us of the taxes imposed by them.

The Finance Minister Pranab Mukherji has insisted the state governments to call off taxes at state level responding to which the Andra Pradesh government has cut down on the VAT by 2%.

Turning out to be a pro-rich economy

Another non-combatant here is the automobile industry. Yes, I am talking about the diesel cars. Keeping the diesel prices untouched is no solution to the situation but will give rise totally different consequences.

The demand- supply is a straight and easy one. With increase in petrol prices, the demand for petrol cars will come down and will generate a demand for diesel cars. Taking advantage of the situation the prices of diesel cars will be shot up as the rich can however afford them. Oh yes, the Indian roads would look fabulous with costly cars moving around. This will now give rise to a large gap in sales of petrol and diesel cars.

Can you understand the irony here? The rich are buying diesel at subsidized prices. Thankfully, the center has announced a new excise duty to be imposed on diesel cars responding to wide critisizism from all sides.

Are we really affected by the price rise?

Now, has anybody stopped using your bikes or cars on account of this development in the fuel price? I bet none! The prices will again be reviewed on June 16th and from this time we will be able to absorb any shock.

All we can do is to adopt oil saving techniques and use our vehicle judiciously. Walking a few distances is good for health. And when situations are too scary simply shift to public transport like buses or trains for a day or two or use cycle rickshaws for short distances.

All you boys can enjoy the extra pocket money under the disguise of petrol and take your girls out of a long walk.

Source for statistics: The Hindu, The Economic Times, Google news.