The Curious Case of Oil Prices in India

India is the third largest importer of Crude Oil in the world. Imports constitute 85% of the country’s crude oil requirements. Naturally, a decrease in oil prices is supposed to reflect on the oil prices in the country. The situation is starkly different. The prices of fuel have been steadily increasing everyday. There has been a hike of 10 rupees/litre within 20 days. At present, India has the highest fuel price among most of its neighbours . Although the government might blame the pandemic again, it is good to be reminded that the whole world was hit by the corona virus, not just India.

Demanding an explanation to this price hike, many MPs spoke up against the government.
Here, I’d like to quote, Samajwadi Party MP- Vishambhar Prasad Nishad: “Why is the price of fuel in Ram’s India higher than Sita’s Nepal?” I’m afraid, this might’ve just hurt the religious propaganda of the present government. However, the recent reason for the woes of the people inflicted by the government is not based on religion. It is based on the belief of the government that the infrastructure development of the country can be done only if the people of the country sacrifice their standard of living.

The Dynamic Pricing System:
The first question that comes to the minds of people is, how can the government keep increasing the prices everyday. The reason is the Dynamic Pricing System followed by the government for the revision of fuel prices.

What is it?
The prices of oil were always regulated by the government, however, due to the unrest among the people a new system was introduced. The Dynamic Pricing System aimed at deregulating the prices and increasing transparency. In 2011, the Manmohan Singh government deregulated the prices of petrol, and the diesel prices were deregulated in 2014. The new system provided for the oil prices to be revised on the 1st and the 16th of every month, in accordance with the global prices. This led to a problem for the government. The public would anticipate the global prices every month. If the prices were set to rise,they would refuel their vehicles one  day before the price
hike. This resulted in losses for the government. However, these losses were nothing compared to the hole being made in the common man’s pocket, now.

On 16th June 2017, the Modi government came up with a new scheme. It was decided that instead of revising the prices every fifteenth day, the government would do so everyday according to the global prices. This would have been acceptable if the government did actually comply with the global market prices. In the name of revenue collection for the government, the average Indian citizen is being robbed in broad daylight and no one is saying a word.

A Comparison of the Oil Prices:

                                         May 2013                         February 2021
International Oil Prices: 90-108 dollars/barrel           55-60 dollars/barrel
Price in India :              71 rupees/ litre                      90 rupees/ litre

As is evident from the data, when the international oil price decreased to half its value in 2013, the price in India increased by 28%. Then, what good was the new scheme which was supposed to comply with the global market prices.
Politicians who campaigned tirelessly against the government in 2013, have nothing to say now. Prakash Javadekar-Minister of Environment and Climate Change- in 2013 challenged the then government to reduce the oil prices to Rupees 34/ litre. I’d like to ask him, if it was possible then, why isn’t it possible now, when the prices are much lower than before.

The base price of petrol at the moment is Rupees 27.74/litre in Delhi but When it reaches the people, it becomes 81 rupees/litre.
here’s how:
Breakdown of price            Per Litre
Base Price:                          27.74
Excise Duty:                        32.98
Dealer’s Commission:            3.67
VAT:                                   19.32

This amounts to the total price of 83.71/litre. As compared to other states, the prices in Delhi are lower. What is to be noted here is that taxes amount to 60% of the price we pay for petrol per litre.

However, it’s not just India. There are many countries with prices similar to or higher than India at the moment. Which are those countries? Germany, Japan, South Korea, France, Hong Kong.
What is common among them? They are developed countries with per capita income, much higher than India.
Taking the example of Germany. The petrol price in Germany is 119 rupees/ litre. The average income of a person per month in Germany is ten times that in India. This means that their purchasing power is also higher. However, they are paying only 10% more for fuel, than an Indian.

The Reason:

The government is running on a fiscal deficit, partly because of the pandemic. Oil prices are one way that the government can collect revenue and overcome the fiscal deficit. In the year 2020, an estimated 2000 crore rupees was collected as tax on oil. This will reach 39000 crore rupees in 2021.
All of this seems viable and logical, until you think about the people who are suffering because of the price hike. Is it right to tax the people dry and blame everything on the pandemic? The overestimation of revenue and the underestimation of expenditure by this government is not new to the masses.
The Government is taking advantage of the decrease in global oil prices to increase its revenue. However, when the government doesnt know hoe to estimate revenue and expenditure correctly; the taxpayers are the real losers.

The Blame- Game will Never Stop:

Amidst all this agitation and unrest in the people’s minds, what does our government say?
As always, the blame is on the weak economy passed on by the UPA government. Every price hike and economic blunder made by the BJP government at present is attributed to the ‘irreparable damage’ done by the UPA government, in the past. Our Prime Minister blames the previous government for not reducing India’s fuel import dependence.
These are the exact words of the Prime Minister who vowed ‘Acche Din’ for all: “Had we focused on these subjects much earlier, our middle class would not be burdened.” What is curious is that the dependency on imports increased from 77.3% in the fiscal year 2014, to 85% in the fiscal year 2020. But of course, the BJP is not at fault, again.

The rise in prices at the moment is being attributed to the global crude oil prices. However, the government is not addressing the vast difference in the global prices and the prices in our country.

Where are the socially conscious citizens of India who couldn’t bear the prices in 2013?

When the oil prices hiked in the past, the moral meter of our celebrities, spiked. They stood with the people and the protesters. There were nation wide protests against the price- hike. It is curious to see none of them showing up now. One can’t help but wonder why? Is it because the country is drowning with protests and disagreements with the government? Or, is it the fear of a government which places brutality over morality. At the moment it seems that the opposition party and its subsidiaries are the only ones sympathising with the people; either for votes in the next elections or just fulfilling their duty as opposition.
People are organising various innovative protests against this unacceptable price hike but none of the large media houses are covering these protests. This raises a question of the freedom of press in the country? More importantly, it raises red flags on the autonomous regime of a government in the so-called “largest Democracy of the World.”

It is agreeable that the government has to levy taxes to keep the country afloat. However, drowning the people to keep a ship afloat is a crime against humanity.
Taxes should make up a small part of the price of a commodity, not vice-versa.
It is also true that India is heavily dependant on imports to meet its energy requirements. We need renewable, green energy to replace crude oil in the near future.
However, it is only possible when the government and the people work together. Price hikes in every sector will only increase the expenditure of the common man. This will further decrease the quality of life for ordinary citizens. Levying taxes in the name of development is not the way to go. Shouldn’t a country with such a large amount human resource at its disposal focus on the development of its most important asset?