Fuel prices will stay high, government won't step in

New Delhi: There seems to be no respite for consumers from skyrocketing petrol and diesel prices, as petroleum minister Dharmendra Pradhan on Wednesday said the government would not intervene to keep fuel prices down.

Mr Pradhan said it wasn’t in the public interest for the government to intervene in the day-to-day business of the oil marketing companies. The minister said the petroleum ministry’s analysis showed that the daily revision in petrol and diesel prices was in the long-term interest of consumers as it was the most transparent and reassuring methodology. He claimed the government had market-linked petroleum product prices in the interest of consumers and said multiple hikes in excise duty by the Centre since 2014 on fuel helped in funding welfare programmes in the country.

Analysts say the government can easily reduce petrol and diesel prices and give relief to people by cutting excise duty on these fuels. However, some sections of the government are reluctant to do so as it is an easy way for them to mop up revenue when economic growth is slowing down (impacting tax generation) and because the finance ministry has set a tight fiscal deficit target.

The government had, between November 2014 and January 2016, raised excise duty on petrol and diesel nine times to take away the gains arising from falling international oil prices. In all, duty
on petrol was hiked by '11.77 per litre, and on diesel by '13.47 per litre. Petrol prices were market linked in 2010 and diesel in 2014.

The government is under huge political pressure as fuel prices are hovering around a three-year high in some parts of the country, despite international crude oil prices being nearly half of what they were in 2014.

While petrol prices have increased by '7.32 to reach '70.38 a litre in Delhi since July, the highest since August 2014, diesel has risen by '5.36 to '58.72.

Mr Pradhan reviewed the fuel price situation with the senior officials of oil companies on Wednesday.

Defending the hike in fuel prices, Mr Pradhan said the world refining capacity had come down by 13 per cent due to the hurricane in the United States, due to which in the last three months international petrol prices had jumped by 18 per cent and diesel by 20 per cent.

However, he said as per indications from the market, fuel prices will fall in the coming days as the situation stabilises in the international market.

On the increase in excise duty on petrol and diesel  by the Narendra Modi government after it came to power, the minister said the government needs money to fund social welfare programmes for the common man. “We have to fund massive highways and road development plans, railway modernisation and expansion, rural sanitation, drinking water, primary healthcare and education. Allocations on all these heads has gone up significantly. Where do we get the resources for these?” he said.

Mr Pradhan said in the past few years states like Kerala and Delhi had also increased VAT on petrol and diesel. He said 42 per cent of the money raised through excise by Centre was shared with states for development programmes.

The minister said petrol and diesel must be brought under the ambit of GST so that there is predictability on taxes on these two fuels.

Mr Pradhan said before the introduction of dynamic fuel pricing, the price hike on petrol and diesel used to hurt consumer sentiments. But after June 2017, this wasn’t the case as there are changes in fuel prices on an everyday basis.

“The simple question the government needs to answer to the people of India is —  when crude oil prices have fallen by over 52 per cent between May 2014 and September 2017, why have petrol, diesel and kerosene prices gone up by over 50 per cent? That is a simple question,” said Congress leader Manish Tewari. He said his question to the PM was: why are petrol and diesel prices going up when crude prices are coming down internationally? “By the definition of your spokesperson, would the present government not better qualify for the label of being an ‘economic terrorist’ as it called us in 2008?” Mr Tewari asked.