Prices Up, Across-the-Board : None owns the onus, previous Govts blamed

Manoj Varghese Manoj Varghese
08 Mar 2021

Milk Prices are likely to soar to unprecedented level. Owing to the rise in petrol and diesel prices, and in support of the farmers protest, our milk vendor from Gazipur area, in Delhi, has warned of a steep price hike. If this happens, automatically the price will go up for curd, paneer, cheese, butter, sweets and other milk products. With the increase in cost of tea leaves substantially by almost 50 % in the recent times, the street chai at Rs 10 is likely to cost Rs 20. Petrol is now retailing above Rs 90 per litre in all major cities, including Delhi, and has crossed Rs 100-mark in many places. Although painful for the consumers, on the farmers’ front, any price hike to benefit their crop or milk production is justified for their hard labour. 

The government version for the petrol price hike is that the natural and indigenous oil resources were not explored by the previous governments. But the fact is that our scientists had explored natural oil and gas resources in the Krishna-Godavari Basin, before it was taken over by big corporates. The natural resource, spread across more than 50,000 sq kms in Andhra Pradesh, was a major breakthrough for our research and development team almost two-three decades back. Thereafter, natural resources of oil and gas were explored in several states like Bihar and West Bengal among others. As someone has rightly said, “Natural resources are not something we inherit from our forefathers but something we borrow from our children”.

The rising fuel prices have a cascading effect on businesses spread across various sectors, ultimately impacting citizens. It is adding fuel to fire. The public transportation sector is considering a hike in rates in view of rising operational costs. Companies engaged in the logistics and transportation of goods are expected to increase their service rates soon. From the food you order to the vegetables and fruits you buy, everything is likely to get costlier. The refined oil has jumped from Rs 80 to 150 per litre, pulses have become Rs 150 from 80, in a short span of past three months.

Speaking on the sky-rocketing prices of petrol, BJP leader Subramaniam Swamy asked, why is petrol costlier in Rama’s India than in Sita’s Nepal or Ravana’s Lanka? The funny part is that petrol is supplied to Nepal from India. Some people in Bihar’s Araria and Kishanganj regions are crossing the border to buy cheaper fuel and are smuggling in from neighbouring countries like Nepal and Bangladesh.

Petrol price was Rs 72 per litre in 2013 when the price of crude oil was around $106 per barrel in the International market. Whereas, now the price is $63 per barrel and the consumer is forced to pay over Rs 100 in some cities. The benefit has not been passed onto the general public. Petrol price hike directly or indirectly affects all major sectors like transportation, textiles, auto, Fast Moving Consumer Goods etc. 

It is a chain reaction, which once started will affect all. Increase in petrol price will increase the transportation cost which will increase the price of goods; this will force the people to loosen their pockets even more, and the chain effect will continue. Price hike affects mainly people getting low wages or fixed salaried middle-class as compared to those drawing high salaries. The common people or “aam aadmi” are the worst-hit.

The fuel price hike will have an impact on the automotive sector, a large source of employment in the country, as vehicle sales may see a sharp drop. A further contraction in demand for vehicles will have a major adverse impact on the automotive industry and lakhs of Micro Small and Medium Enterprises (MSMEs) that supply goods to the sector. Lower demand will, therefore, lead to widespread job losses in the auto and ancillary sectors.

Firming of international crude oil rates and extremely high taxes levied on fuel are the key reasons behind the latest round of petrol and diesel price hike in the country. Global crude oil prices have been increasing after the Organisation of the Petroleum Exporting Countries (Opec) decided to continue supply curbs. Being the third largest importer of oil in the world, the recent firming of international crude oil prices has severely impacted India, where citizens are paying extremely high rates for fuel in comparison to neighbouring countries. 

The biggest reason for higher fuel prices is the high rate of central and state taxes. At the moment, Indians pay one of the highest taxes on fuel in the world. Since India follows a dynamic system for altering fuel rates, oil marketing companies are mostly responsible for the recent hikes. However, the government does impose a tax on the base price of fuel.

Another reason is Budget 2021 which has also imposed a new agriculture infrastructure and development cess. It must be noted that state and central taxes are about 180 per cent of the base price of petrol and about 141 per cent of the base price of diesel in Delhi. As the fuel prices rose, experts in the field expected a cut in central excise duty, but it is not happening. Union Petroleum Minister Dharmendra Pradhan has ruled out any cut in duty on petroleum products.

Meanwhile, vegetable prices have already started rising. Onion price that had remained stable for the past two months has started to rise again in the domestic market costing almost Rs 70 per kg in retail. And, the worrisome part is that the farmers at the grassroots level is still receiving only Rs 3-5 per kg for their produce.  

Finance Minister Nirmala Sitharaman said that steep rise in petrol prices is a vexatious issue for which there is no answer. She said, "I am treading on an area where whatever I may say to bring reality into picture will sound like I am avoiding the answer or shifting the blame. Fuel price rise is an issue in which no answer except for reducing the price would convince anyone." 

The price of LPG cylinders too has increased manifolds and that too very frequently, which has made the life miserable and brought criticisms to the Govt. "Loot from the public, Development of only two," Congress leader Rahul Gandhi tweeted on the hike in LPG cylinder prices. "50-rupee hike in LPG!!!!! N they call themselves Aam Aadmi ki Sarkar. What a shame!" tweeted now Union Minister Smriti Irani in June 2011. 

Union Road Transport and Highways Minister Nitin Gadkari threw a googly at the steel industry, saying his ministry will allow use of “synthetic fibre” and “composite fibre” bars in place of steel products for building roads and bridges to reduce cost in the face of “artificial” hike in price of the key construction raw material. 

If fuel prices remain high, experts say it will lead to rise in inflation. Inflation or persistently rising prices is a major problem today. When prices rise due to inflation, the value of money falls. When there is a persistent rise in price level, the people need more money in their hands to buy goods and services. Unfortunately, the authorities have turned deaf ears to the public need and demand, and they seem to be in an election mode capturing one state after the other.

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