Oil price: FM’s heartless silence

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By appropriating all the gains from a sharp fall in the price of crude oil in the international market, the government has again sent out the message that its own ledgers are more important to it than the people’s budgets. Once again, crude oil prices seem to favour the Modi government, which has been facing much flak for the country’s economic situation. But is the government prepared to turn the steep fall in oil prices to its advantage or will it become a case of another missed opportunity? The levy of an extra Rs 3 excise duty on petrol and diesel prices would give the government an additional revenue of Rs 39,000 crore. It should rightly have gone to the common man, who has to face the double whammy of rising prices and a spreading coronavirus threat. People are made to pay not just higher prices for petrol and diesel, but they will also have to pay more for all the goods and services whose prices will go up because of the fuel price hike. The economy has steadily slowed down. There is high unemployment, millions of jobs have been lost, wages and salaries have been cut, rural incomes have fallen, and all this has reduced the money in people’s hands. But they are being forced to pay more.

When oil prices were deregulated, the government’s promise was that domestic prices would be cut whenever international prices fell. This promise has not been kept. Instead, the government has used the low international prices since 2014 and the periodic dips to below even $30 a barrel to shore up its own finances. The current crude price levels should have resulted in a cut in retail prices by Rs 10-12 at least, but the government has kept the benefit to itself. In 2014, the duty on petrol was Rs 9.48 and that on diesel was Rs 3.56 a litre. While international crude prices have fallen from the high of $110 a barrel in 2013-14 to about $30 today, people are paying even higher prices at the pump for petrol and diesel today as taxes account for more than 60 per cent of retail fuel price now. In view of the worsening economic situation, it should have been the government’s effort to put more money in the hands of people so that consumption goes up and demand gets a push. This is especially true when the economy is going to be impacted by the curbs caused by coronavirus and the resulting slowdown of social and economic activity.

The consumer would certainly want the duties — which account for the major portion of retail price — reduced and pump prices lowered. But the government would prefer to raise them to maximise revenues. Past actions like demonetisation had hit the spending power of people, and public sector companies and even the RBI are being squeezed for revenue. The refusal to pass on the benefits of the fall in oil price to the consumers is part of that policy. Finance Minister Nirmala Sitharaman had a smiling silence two days ago in answer to a question whether fuel prices would be cut. The silence was heartless.

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