What’s the fuss on fuel price hike all about?

What’s the fuss on fuel price hike all about?

Anupama Airy

For many years, petrol, diesel and LPG price hikes were a taboo and any change in their prices would upset consumers, political parties and even the government.

Subsidising domestic fuel prices and making the consumer enjoy freebies was something our own governments had practiced for long. This was despite the heavy toll that subsidies were casting on the country’s economy.

Let the political parties of India face it that it’s only after the Modi government came into power that gradually fuel subsidies were phased out in India especially in auto fuels including petrol and diesel.

More importantly, even though subsidy on cooking gas or LPG continues, it too has been rationalised by directing it to the needy and poor. Those who can afford have volunteered to give up subsidies.

Fortunately for this government, when it took over in May 2014, and unlike the previous regime, the global prices of crude oil have been at their all time lows.

This also helped the Modi government in smoothly implimenting the fuel subsidy reforms.

Having said that the political will power to eliminate fuel subsidies was strongly exhibited by the NDA government and union oil minister Dharmendra Pradhan and his team of officials at the petroleum ministry made it happen for petrol and diesel.

LPG subsidy was given to those who needed it and under the government’s PMUY, LPG was taken to every nook and corner of India thereby empowering the rural woman with clean fuel.

It’s really not about BJP Versus Congress regimes. Let’s understand facts and fight it out on facts that have led to the ongoing continuous hike in prices of petrol and diesel in India.

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International crude oil and petroleum product prices have been on the rise for a while now and considering India imports over 70% of its oil requirement, any increase in global oil and product has a direct impact on domestic fuel prices.
Retail selling price (RSP) of petrol and diesel is linked to international product price (FOB prices – Free on Board)

* Current international product prices have increased mainly due to the Hurricanes Harvey and Irma in USA; 13% pf US refinery capacity was shut down.

* FOB price of petrol in International market increased from US $57.42/bbl in June to US $67.85/bbl on 8th September (18% increase in 3 months)

* FOB price of diesel in international market increased from US $57/bbl in June to US 68.32/bbl on 8th September (20% increase in 3 months).
International crude prices have increased by 13% from 1st July to 13th September (US $47.86 to US $53.06)

* Many state governments have drastically increased the VAT on petrol/diesel (like Kerala from 26% to 34%, Delhi – from 20% to 27% on petrol).

It may be noted that 42% of excise collections are transferred to state governments for infrastructure and welfare programmes. Meanwhile, minister Pradhan has already urged the GST Council to consider bring petroleum products under the ambit of Goods and Services Tax. This will help bring the prices down.

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