Finance minister Nirmala Sitharaman has shed copious tears about high fuel prices and claimed that the government is in a dilemma over the issue. But the government’s cause is not that of a dilemma, but one of avarice. Dilemma is when there are two options, both of which are correct – morally, ethically and in all respects. But in the case of fuel prices, the government has always been opting for wrong, when the choice was between right and wrong. In spite of her concern about the plight of the common man due to the continuous rise of petrol and diesel prices, the government is happy when the crude oil prices go up, except in times of elections, because it brings more money into its kitty. She even showed a rare candidness by admitting that ‘there is revenue there’. But here again, she has passed on a bigger part of the blame to the states. “It’s not just me, you ask any state, it is a source of revenue,” she said and also insisted that 41 percent of the taxes collected on petrol and diesel goes to the state governments, which incidentally are least inclined to forgo their right to collect more and more from the consumers in the name of spiking crude prices.
For the sake of record, India had asked OPEC to ease production controls so that crude prices could reverse a recent trend of consistent rise in the wake of the cartel’s decision to continue output controls for some more months. But the cartel members, particularly Saudi Arabia, with which India has long-term buying arrangements, rejected the plea saying New Delhi should have no worries as it had bought oil at rock bottom prices last year. The Saudi oil minister, in fact, suggested that India take out some quantities from its storage built with cheap oil. OPEC+ decided to show remarkable restraint and keep production stable in an effort to see stock draws accelerate so as to get rid of the extra output that has been filling the storages during the Covid pandemic’s worst days. It is clear that the producers are now eyeing a price target of USD 70, a neat USD 10 over the current level, which is already straining the finances of importing countries.
The OPEC meeting seems to have managed to keep both sides happy, with Russia, favouring more output, having been allowed to raise output in the name of increased domestic demand, while the Saudis got what they wanted, which is extension of the 1 million barrels per day cut at least for one month, to begin with. This is when the dilemma that Nirmala Sitharaman talks about will overwhelm all calculations of the government. With retail prices already hovering past the century mark, the upside potential for retail prices is rather limited, which means that the government will have to let go of some of the potential gains. The talk of bringing fuel under the GST regime could be an effective solution to the boiling oil market. But for this to happen, both the Centre and states will have to settle for a certain ‘loss of revenue’, which neither side seems to be willing to concede without a fight.