Modi Government should not reduce duties on petrol and diesel

There have been debates about the surge in prices of petrol and diesel which, many feel, have gone up too high, causing hardships to the common man. The social media has been active in demanding that the Modi government should reduce duties, to bring down prices. Old videos of Modi, as well as other bjp leaders, are being circulated on the social media, showing them demanding reduction in prices of petrol and diesel when Manmohan Singh government was ruling. The people’s complaint is: why Modi, who opposed price hike then, is behaving differently now.

We feel the Modi government should not succumb to this pressure (Till not it had) and should keep prices of petrol and diesel at market-driven levels. In the past, India had paid heavy prices by offering huge subsidies on petroleum products at the cost of fiscal prudence. The Modi government has been rightly using benign prices for crude oil since 2014 and improving the fiscal health of the economy, by increasing taxes on the petrol and diesel. Due to this, the Indian economy is now on a better footing, while keeping the deficits under control. We no longer carry the ‘fragile’ tag.

India’s credit rating too has improved. The revenue from the higher duty levied on petrol and diesel are used for welfare schemes, as well as expanding infra footprint in the country. The higher revenues accrued from petroleum products have been helping the country become stronger. People do appreciate that they can manage to pay higher prices on petrol and diesel, if the same are going towards improving the health of the economy. During the previous regimes, despite subsidising fuel, inflation was in double digits, which created severe hardships for the common man. Hence, the present situation has to be viewed as different from the previous regime’s.

In absolute terms, the prices of petrol and diesel were almost at the same level before the Modi government came to power. Then, it had gone down. And, as India imports almost 80 per cent of its crude requirement, any fluctuation in the international market impacted the Indian prices.

I feel a low inflation, with prices of petrol and diesel at market-driven levels, is better than a high inflation, with petrol and diesel prices subsidised. What matters to the common man is the overall effect of the inflation. Prices of petrol and diesel are just parts of the same. As long as common vegetables like Potato, onion and tomatoes are available at reasonable price it does not matter much what is the price of diesel or petrol.

At the same time, we feel it was unfair that the Modi government allowed under-recoveries in petrol and diesel during the campaigning of assembly elections in Gujarat and Karnataka. These were populist measures and Modi and the bjp were not voted to indulge in such games. Politicians have an obsession about controlling prices of petrol and diesel for their political gains. It would be better if the Modi government gave up such obsessions. During the next few months, we would witness assembly elections in Mizoram, Rajasthan, Chhattisgarh and Madhya Pradesh, followed by the General Election. If the Modi government allows under-recoveries again, it would cause great damage to the health of the economy. In the few assembly elections that took place recently, it had become a trend to announce farm loan waivers, again causing great damage to the health of the economy. It had taken a great effort to bring down the burden of subsidies. By announcing farm loan waivers, we are going back to the same position we were in before 2014.

Meanwhile, crude oil prices have come down and are trading now at $66 per barrel. This should give a big relief to the government as well as customers, while also reducing the urgency to cut duties. But crude oil is a volatile commodity and, hence, can move up anytime in the coming days, creating pressure on the government. If, for some reason, crude starts falling, then, it would give immense relief for Indian economy, as well as the government. It would also release the pressure on the rupee, which has been one of the worst-performing Asian currencies in 2018. People should realise that the government needs extra revenue to tide over deficits and, hence, if they pay a few hundred rupees more every month, they will be contributing towards the betterment of the economy. This is what the government should impress upon the citizens of the country.