June 15th, 2006 Govindraj Ethiraj
|
Yesterday marked my first visit to the gas station after the recent fuel price hikes. It was traumatic. Gazing at the rapidly ticking indicator, I began to feel a little dizzy. And felt my heart beat rising. Petrol in Mumbai city now costs Rs 54 + per litre.
Once upon a time, the pumps only displayed the number of litres that were flowing through. Thanks to some elementary technology upgrades, they helpfully display the price as well. A street mugging must be a less stressful experience.
I think to myself once again, we must be a very rich country to afford all this. Actually we are not. It’s the government that gets richer when prices go up. And consumers get poorer. Almost 50% of the fuel price is taxes. And it lands up in state and central government coffers.
Maharashtra has a debt burden exceeding Rs 100,000 crore. When I feel dizzy next time at the petrol pump, I will think about how I am helping my near-bankrupt state pay off some its debt. Actually, it must be interest on debt. Or salaries of its staff. Who in any case do little work (remember how BMC took two days off when Mumbai city was ravaged by floods last year) make life more difficult for me.
One-Way Street
Every hike in fuel prices means more revenue for the government, because the taxes (central and state) are fixed. So it’s a perfect double whammy or is it triple ? You pay more because the price of oil is rising. You pay more because both the central and state governments levy extortionate sales and excise taxes on fuel. And it’s a one-way street.
Contrary to what it may project, I am convinced our Government is the happiest when oil prices rise. Because its money for jam. My friend Sunil Jain whose writings who you will find somewhere around has been arguing the same thing. There are no losses being incurred here, only profits, he says.
The solutions are pretty obvious. And far more complex. There are the oil companies to be taken care of. But that’s not the issue here. This is about taxes. And the perception that’s created and accepted that the Government is incurring losses when it lowers prices or does a rollback. It does not. It loses additional, potential revenue from you for doing absolutely nothing. This is the part that needs far greater highlighting. As is the need to highlight where all this additional money has gone, or goes.
Reluctant States
Several states, most reluctantly, are dropping prices of petrol and diesel. On Wednesday, Maharashtra for instance lowered prices by 80 paise and 30 paise respectively. Remember, the Government earlier hiked prices by Rs 4 for petrol and Rs 2 for diesel respectively. They are reluctant because a fraction of the easy money they were raking in is getting withdrawn. Till the next fuel hike. And till some one puts a stop to this. Do you have any ideas on how we can put our collective foot down, write in !
|
Loading ...
This entry was posted
on Thursday, June 15th, 2006 at 9:47 am and is filed under General.
You can follow any responses to this entry through the RSS 2.0 feed.
You can skip to the end and leave a response. Pinging is currently not allowed.
Disclaimer
All the content posted in the 'Business Standard Blogs' section, unless specified otherwise, are made by Business Standard employees. The content posted in 'Business Standard Blogs' does not follow routine internal Business Standard reviews and editorial processes and should be considered only as the views and opinions of the employees and not of Business Standard.
June 19th, 2006 at 5:13 pm
exactly!!! and its a wonder how easily people believe that our oil companies will collapse if the government dont hike the prices…
the fact that profits are inbuilt in the prices along with a plethora of taxes is something that escapes the general public…..mainly because the statements made by the government (stated as such without analysis by general dailies) are so simplistic and one-dimensional that the people (with their inherent belief in the truth of newspapers) believe in the argument….that people dont have much idea about how the economy works and with their general disinclination about any discussions connected with economics, the government can get away easily…..
the solution? if the truth breaks upon people, pressure will be applied, but awareness is exactly what the parties work against….
June 21st, 2006 at 4:59 pm
dear govind,
what needs to be done - spread the word.
about why the prices are rs.54.25 and not lower like in some of our neighbouring countries? what is the percentage of taxes in that rs.54.25? what is the profit margin of the oil companies in that rs.54.25?
these facts need to be clear and transparent and known to the consumer. then we will know where the loses or the profits are originating from. and i firmly believe that the business papers are the ones who will do this analysis - never the govt or the oil companies.
ever checked the quarterly results of the oil companies - when did they show a huge loss due to delayed price hike? i dont remember one instance, maybe some one can enlighten me on this aspect.
another aspect of the oil prices, when it was de-controlled a few years ago, for a few weeks it rose AND FELL with the international market prices. we were happy. but then the the prices have only climbed one way - crude being at $75 or at $68, indian fuelprices only climb. why?
thirdly, the price hike is effective midnight x date, what happens to the tankful of fuel at the pumps that was already there on the given date but worth at the older price (in this case Rs.4/- less)? pan india it must be wirth crores at Rs.4/- per litre incremental cost.
This pandora’s box needs to be opened…….