By Prarthana Mitra
Amidst soaring petrol prices unabated by nationwide protests on Tuesday, fuel costs reached new heights even as several states slashed the price of petrol to ease the rising discontent and burden. After Andhra Pradesh and Rajasthan announced Ra 2 and 4% cuts respectively, West Bengal Chief Minister Mamata Banerjee decided to reduce the cost of petrol by Re 1 per litre on Tuesday.
For the time being, we have decided to slash one rupee for each litre of petrol and diesel. We also demand that the central government consider cutting down the cess on diesel and petrol prices, Banerjee told reporters at the state secretariat, also demanding that the centre reduce the cess. She accused the BJP-led central government of increasing the excise duty nine times, even when crude oil costs were falling globally. Our government has never increased the sales tax or cess during all these years, she added.
Graph or gaff?
BJP was also recently under fire for posting two misleading infographics titled “Truth of Hike in Petroleum (and Diesel) Prices.” In a bid to defend the current fuel prices, the ruling party had tweeted two bar graphs mapping the percentage increase in petrol prices since 2004, but astonishingly enough, the final bar (representing a price of Rs 80.73) was shorter than the adjacent bars obviously signifying lower costs.
The opposition and internet trolls wasted no time in fixing the graph with their idea of what the reality represented.
The intentions of the original graph also denied Indian voters the entire picture of what is going on in the economy. When Congress came to power in 2004, the price of crude oil was $36 per barrel, as opposed to $111 in 2011. Yet, the highest retail price during his regime went only as high as Rs 76.06 per litre in September 2013.
On September 11, 2018, petrol price attained a record high of Rs 80.87 per litre in Delhi (when the crude is around $68 per barrel) and Rs 88.26 per litre in Mumbai, registering a 238% increase in 20 years.
Cause and effect
The current hike in global crude costs and the concurrent fall in the rupee have contributed majorly to this exorbitant rise. However, the third contributing factor being taken up by critics and the opposition is the excise and VAT imposed on petrol and diesel. The tax is ad valorem which means as fuel prices go up, more tax is imposed.
The Centre, which gained Rs 2.29 lakh crore from excise duty on petroleum products in 2017-2018 and Rs 2.42 lakh crore in 2016-2017, is unwilling to reduce taxes saying it can not afford to do that. After all, this is a major source of funding for a lot of government schemes. Petroleum expert Madan Sabnavis, chief economist at CARE, firmly believes, “Petrol and diesel prices will not come down unless the Centre or states decide to cut taxes.”
Although experts agree that the price is unlikely to come down in the foreseeable future, an SBI report claims that states stand to make a windfall gain from this entire exercise. 19 states could make Rs. 22,700 crores over and above the budget estimates for the current fiscal according to the report, which also said, Maharashtra, Madhya Pradesh, Punjab, Tamil Nadu, Andhra Pradesh, Rajasthan and Karnataka have the privilege to cut petrol prices by at least Rs. 3 from their existing rates and Rs. 2.5 on diesel,” without it affecting their revenue arithmetic.
Prarthana Mitra is a staff writer at Qrius