DC debate: Is the increase in petrol, diesel prices due to deregulated market?

Prices hiked only when necessary

Of late, one is simply baffled by the manner in which the Congress has been conducting itself. For instance, Rahul Gandhi recently undertook a dramatic 15-km padayatra in Adilabad district, apparently to console families of farmers who committed suicide. But he is completely oblivious to the fact that during the UPA rule — between 2004 and 2014 — over 3 lakh farmers committed suicide in the country.

Similarly, during the same period, petroleum prices registered a steep hike of 150 per cent. However, the Congress now criticises the Narendra Modi government for an inevitable increase. The ways of the Congress are paradoxical.

The oil companies review the international situation — the price of crude oil in the international market and INR-USD exchange rates — and decide whether to increase or decrease the price of petroleum products.

The role of the government in this entire exercise is minimal. The Modi government, ever since it came to power a year ago, has been running a transparent administration, including in the areas of petrol prices. The UPA government increased petrol prices over 22 times between 2004 and 2014. It decreased prices only twice during the period.

When crude oil prices escalated to $130 in the year 2008, the government chose to increase the prices. And when crude oil prices fell drastically to $75.50 per barrel, it did not extend benefits to consumers. When UPA-I came to power in 2004, petrol price per litre was Rs 34.00 and by 2014, it had gone up to Rs 79.

Whereas the Modi government, soon after coming to power, made it clear that the government wouldn’t meddle with the autonomy of the oil companies. If the international oil prices increase, the government would absorb as much as it can, and if there is a decrease it would extend benefits to the consumer. As a result, there was a steady decrease in the prices of petrol and diesel from August, 2014 to February, 2015. The price of petrol fell by Rs 17.11 per litre and the price of diesel by Rs 12.96 per litre.

It is clear that the petro needs of India are steadily increasing. There are many factors for that. A large chunk of the lower middle-class, middle-class and the upper middle-class families have been acquiring new vehicles, resulting in a rapid increase of two-wheeler and four-wheeler traffic.

Also, after a 10-year recession, there is new hope within the industry and corporate sectors. The fallout of which is on petrol and diesel. If this pace of growth continues, India’s dependence on petroleum will increase to 85 per cent by 2020. The remedy is to give boost to indigenous excavation of crude oil.

The Congress, which ruled this country for 58 years, never bothered about this aspect. Its leaders focused only on mustering personal wealth. They never thought about the wealth of the nation. For the first time, we have the Modi government, which is thinking of a vibrant India and a vibrant India involves making everyone healthy and wealthy.

I do not want to suggest even remotely that the hike in petroleum prices would not have a cascading impact. It certainly would, but in this era of globalisation, we have to understand these challenges and prepare to mitigate them. It also requires the collective will of the people and commencement of research to explore alternative ways of accelerating indigenous production and scouting alternatives to crude oil. G. kishan reddy, Telangana state BJPpresident and MLA

Hikes benefit centre and omcs

The BJP-led NDA government at the Centre claims to be a “Soojh Boojh ki Sarkar” — a wise government, which takes decisions for the welfare of the public. But it is failing on all economic fronts.

On Thursday night, it raised the price of petrol by Rs 3.31 per litre and that of diesel by Rs 2.71 per litre. This was the second time in a fortnight, the last being on May 1, 2015. Such a move is bound to exert serious inflationary pressures on an already grappling economy, as prices of essential commodities as well as industrial raw materials are bound to go up. Moreover, this move will have an adverse effect on the common man as transportation costs will shoot up.

A simple analysis of international crude prices over the past one year reveals startling results. On May 26, 2014, the price of Indian crude was Rs 6318.76 per barrel. With the drop in price of international crude oil, the price of crude oil is now in the range Rs 4141.94 per barrel.

In a deregulated market, a 34 per cent drop in crude prices should have been automatically accrued by the common man. However, this government has passed only seven per cent of this benefit to the common man. Diesel was being sold at Rs 56.71 per litre, when the BJP assumed office last year. Similarly, petrol was being sold at Rs 71.41 per litre when the BJP formed the government last year. If the wise BJP government had truly implemented the UPA government’s formula in fixing oil prices, the prices of petrol should have been '46.80 per litre and the diesel should have been priced at Rs 37.17 per litre.

But the BJP government at present is charging Rs 66.29 per litre for petrol and Rs 52.28 for diesel. Effectively, the middle class is being charged Rs 19.49 per litre extra for petrol and Rs 15.11 per litre extra for diesel.

The government takes pride in a deregulated market for petrol and diesel. But in reality, this is nothing but an artificially-deregulated market. When the price of crude oil goes up, the government conveniently blames a deregulated market for the increase. But when the price goes down, the government is quick to impose an excise duty to conveniently take away the profits.

While the benefits accrued by the way of falling prices of international crude are clearly not being transferred to the consumer, the government has taken this opportunity to make windfall gains out of this opportunity. An increase in excise duty on petrol and diesel by as much as four times since November has ensured that the government mops up a whopping Rs 74,465 crore. The oil marketing companies have also made a fortune amounting to more Rs 80,000 crore. It was expected that this increase would have contributed to an increased spending in social sector schemes. However, in reality what we have observed is a number of ruthless budget cuts.

These measures are bound to have a cascading effect on other sectors of the economy. As observed, exports have dropped, imports also declined by as much as 7.5 per cent and this has led to a rising trade deficit. The latest figures show that the trade deficit of the country has risen to $10.99 billion. Despite BJP’s tall claims of bringing the derailed economy back on the track, all indicators point towards an Indian economy that has been weakening over the last few months. However, by the BJP’s admissions, if these are signs of achche din, may God save our economy. Ajay Maken, Congress leader and former Union minister