Fuel Shock as Petrol, Diesel Prices Hit New Level Across Nation

by May 22, 2018 0 comments

Petrol, Diesel Prices Hit New LevelThough expectations of even higher fuel prices may be off, consumers are demanding lower taxes. Government oil firms continued to push up fuel prices to levels not seen before on Sunday


Global crude oil prices have been headed upwards ever since Donald Trump torpedoed the nuclear deal that the United States and five other nations had signed with Iran. The fear of global uncertainty as well as punters deciding to make some money on crude pushed global crude prices towards the $80/barrel mark, precipitating a crisis that that the Narendra Modi Government never expected, but should have seen it coming and must now work towards mitigating it. The greatest gift that Narendra Modi received when he won the mandate in May 2014 was that of low global crude prices. The Obama Administration’s talking to Iran and fracking for shale oil had driven down costs of crude dramatically. Coupled with an Indian driving/rising population used to higher prices, the Modi Government piled on taxes on retail petrol and diesel. These higher excise duties helped the Modi Government with its ambitious social sector schemes as well as huge infrastructure projects. Motorists in the National Capital Region, India’s motoring hub might grumble about higher prices but two brand-new highways — the Delhi-Meerut Expressway and the Eastern Peripheral Expressway — have been funded in a large part by excise duties on fuel. State Chief Ministers crying crocodile tears about high retail fuel prices blissfully overlook the huge amount they have garnered from their share of fuel taxes. The Centre has mopped up an estimated Rs 283,000 crore and States Rs 171,000 crore from fuel duties.

That was fine as long as global crude prices remained in check, but as petrol prices cross Rs 80/litre in some States, it is time for excise duties on fuels to come down to reasonable limits. The Finance Ministry and the Modi Government should not hope that global crude prices will come down in the immediate future. While a successful summit between Donald Trump and Kim Jong-un should soothe global nerves and higher prices might lead to another phase of innovation in crude extraction, the Government should reduce retail taxes as in not to hurt the consumer on the street too much. Keep in mind, the largest number of petrol consumers are not rich car drivers but middle-class commuter motorcycle owners.

At the same time, to wean India off its hydrocarbon obsession, the mandarins in the finance and surface transport Ministries should give up their short-term electrification obsession and explore opportunities in hybrid technologies. While electrification is one way to ensure zero-emissions, it will take some time in India given the high costs of electric vehicles. Even the Government’s own plans of electrifying their fleet of cars has involved buying vehicles that would cost six lakh for ten lakh rupees due to the cost of batteries. The savings involved would be negligible and while emissions would reduce convincing the car buying public to change their habits at such prices is impossible because nobody would buy a car for altruistic reasons. Hybrids, however, are proven technology, cheaper due to smaller battery packs and do not need dramatic investments in new infrastructure. Their fuel savings, which can be dramatic, would be easier to sell to consumers. Hybrids can, if promoted, reduce fuel costs for the consumer and the country in the near-term. But for that, hybrids cannot face a 43 per cent tax rate.


Writer: Pioneer

Courtesy: The Pioneer

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