Rise in price of fuel is unacceptable

The New Indian ExpressFirst Published : 16 May 2011 10:35:00 PM ISTLast Updated : 15 May 2011 11:31:46 PM IST

The hike in petrol prices by state-owned oil companies — the steepest in India’s history — just a day after the announcement of the results of five Assembly elections has left the people seething and the Opposition crying foul. It is bound to fuel inflation further as commuting costs and freight go up and add to the crushing burden on household budgets already stretched with soaring prices of essential commodities. The government’s plea that the oil companies were compelled to jack up domestic prices to cover their losses due to skyrocketing crude prices in the international market is unacceptable. While claiming that the government had no role to play in the price hike, Union finance minister Pranab Mukherjee has virtually stood by the oil companies’ decision, saying the crude rates have gone up by $42 per barrel in the last 11 months.


The argument is specious. This is the eighth hike in petrol prices after it accepted the Kirit Parikh Committee’s recommendation to deregulate them in June last year. After more or less monthly price hikes since deregulation, the companies had not announced any hike since January this year. The fact that they kept petrol prices on hold till Assembly elections proves that they dance to the tune of their political masters and announced the hike only after getting the green signal from the Centre.

The fact is that it is the government’s persistent refusal to rationalise the tax structure on import of petroleum products, which account for over 18 per cent of the government’s revenue, forces oil companies to pass on the burden to the consumers. If the government agrees to cut customs and excise duty on crude and return the cess revenues earned by it due to rise in international prices to the oil companies, there would be no need to hike prices and burden the people. The state governments have also found it easy to impose additional taxes on sale of petrol and other petro-products to consumers. It is time the Centre and States found other sources of income, such as reviving the capital gains tax, and spared the common man.