What's the impact of fuel price hike on the common man even as States, Centre tussle
The petrol and diesel prices across the country continued their northward march after two days break taking its retail rates to unprecedented levels while burning bigger holes in the consumers’ pockets. The oil marketing companies raised the pump price of both petrol and diesel by 35 paisa per litre on Tuesday. With this, petrol is now priced at Rs 90.93 a litre and diesel Rs 81.32 a litre in the capital. Across the country as well the petrol and diesel price increased between 32-40 paisa per litre depending on the level of local duty at the state level.Sources in OMCs said that price rise on Tuesday followed movement in product price in global markets. The crude oil is also on fire with benchmark Brent crude gaining over 2 per cent on Tuesday to reach closer to $67 a barrel now. It was less than $60 a barrel just a few days back.
How are prices benchmarked
The steady fuel price has followed the softening of global oil prices (both product and crude) in the last few days. After crossing USD 65 a barrel mark in earlier week, it is around USD 67 a barrel now. Since fuel prices are benchmarked to a 15-day rolling average of global refined products' prices and dollar exchange rate, pump prices can be expected to remain northbound over the next few days even if crude hovers at the current level or falls. According to IANS, oil companies executives said that petrol and diesel prices may increase further in coming days as retail prices may have to be balanced in line with global developments to prevent OMCs from making losses on sale of auto fuels.
Impact on common man
According to a survey by LocalCircles, around 51 percent Indians are cutting on their other expenses to manage their spending on fuel prices. Around 21 percent of the respondents to the survey said that they are "cutting spending on essentials and it is painful" for them. Another 14 percent are dipping into savings to pay for it. The survey showed that around 43 percent of respondents said that their monthly petrol or diesel bills were lower due to limited commute or work from home among other factors. Another 2 percent reported no spending on the fuels."I write to you to convey every citizen's anguish and deep distress regarding the spiralling fuel and gas prices. On one hand, India is witnessing systematic erosion of jobs, wages and household income. The middle class and those at the margins of our society are struggling. These challenges have been compounded by runaway inflation and an unprecedented rise in price of almost all household items and essential commodities," Congress chief Sonia Gandhi on February 21 wrote to PM Narendra Modi.
Role of State governments
On the question of what the respondents want their state governments to do for lowering the fuel prices, 32 percent said that the government should levy an absolute value of the value added tax (VAT) instead of a percentage of the base price, and 47 percent said the rate of VAT should be reduced. The poll showed that 79 percent of the citizens want their state governments to take action against rising petrol and diesel prices, either by lowering the VAT or levying an absolute value of the tax. Levy of an absolute VAT instead of a percentage VAT on the base price can help keep the prices relatively lower even if the base price of petrol and diesel rises in the coming months. The survey received more than 22,000 responses from citizens located in more than 291 districts of the country.
Finance Minister’s solution
Nirmala Sitharaman, who had increased central excise duty on petrol and diesel by a record margin last year to mop up gains arising from international oil prices plunging to two- decade low, remained non-committal on cutting taxes to give relief to consumers. She went on to explain the tax structure and how production cuts by oil cartel OPEC and its allies had led to a rally in the international oil prices, leading to a hike in retail rates in India. She, however, said the answer may lie in bringing petrol and diesel under the Goods and Services Tax (GST) regime, which will end the cascading impact of taxes and bring uniformity.