Opinion: Rising petrol prices - the onus is on the citizens

New Delhi, Delhi, IndiaWritten By: Pankaj AgrawalUpdated: May 27, 2018, 11:17 PM IST

File photo. Photograph:(Reuters)

The Petrol and Diesel prices are soaring and they are almost at the all-time highest level. Being the most essential commodity, Petroleum has been the favourite domain for the politicians for the slugfest.

With rising price, opposition parties got a much-awaited issue to put Government of India on backfoot. Rahul Gandhi is throwing a challenge to Modi for reducing prices. On the same time BJP's media cell is active too and these days social media is full of stuff proclaiming that how prices of petroleum products surged during UPA regime (2004-2014) and how Modi has been able to rein them in.

But if you go in a bit deep in the realities of this sector, you will find that all these claims and blames are simply bereft of any logic and they are rather hilarious. Indian Oil & Gas sector is in a state currently that any government can do little to tame price in the shorter run.

With rapid economic growth, India has become an energy guzzler over the past 10-15 years and currently, it is the third largest consumer of energy after USA and China. India consumes around 200 MMT (Million Metric Tonne) of petroleum crude oil per year and around 80 per cent of this is being imported on the international price. 

The prices of petroleum products are done on import parity and after adding due taxes and dealer’s commissions, MRP is fixed

The prices of petroleum products are done on import parity and after adding due taxes and dealer's commissions, MRP is fixed. Therefore MRP of Petrol and Diesel are linked with international prices of crude oil.

Since we (GOI) can't control the crude price and bound to pay it, the ways to tame MRP is either by reducing taxes or by forcing Oil PSUs to sell products with under-recoveries (basically selling with a loss). Both of these ways would be like feeding gulab jamun to a patient with diabetes. Mean, these measures will give short-term pleasure but they will inflict serious long-term complications.

Cutting taxes would disturb the fiscal discipline which Modi/GOI could bring to an extent over the past four years and would hamper GOI's huge infra push and other planned expenditure.

Forcing under-recoveries (which UPA-2 did for purely political reasons) to Oil companies would only make these companies sick for days to come, restrict the Capex infusion in this sector and of course it cannot last long.

All government can do (that too to silence opposition) in the short term is that it can give some relief by way of slashing tax but it can't make a huge impact on the selling price. Forcing under-recoveries would be the last thing, which Modi/GOI should and would exercise (in case of crude price further takes heavy jump).

The government should work to take measures to bring strength in this sector in long run

The government should work to take measures to bring strength in this sector in long run. After Modi came to power, GOI has made its oil exploration policy more transparent and business friendly but impact of this on ground would be visible only after many years and that too will not be decisive as the gap between demand and supply is huge and no way India is in the position to multiply its oil production even in the long run. 

OPEC (Organization of Petroleum Exporting Countries) is the international body, who plays the prominent role in fixing crude oil price and country like India are bound to pay it.

So the bottom line is that let the politician enjoy the blame and claim game, the onus to live with the problem and withstand with it lies with us, the citizens only. Don't expect a miracle from anybody to get the reprieve. We need to be a judicious energy consumer and take the high petroleum prices as a hard and unavoidable reality.

We can sum up like this. If you are getting petroleum product cheap (like in 2014-16), the government is an accidental hero or otherwise it is an unlucky victim of the situation.

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)