Why is India witnessing a surge in its petrol and diesel prices?

picture credits- business today

If you are a common man who owns his own means of transportation , chances are that you might already be feeling the burn of scorching , surging oil prices. Yesterday , after Rajasthan, oil prices in Madhya Pradesh too breached 100 rupees mark. Therefore, it is safe to state that the current oil prices in the country are burning a hole in the consumer’s pocket.

The price hike comes around the time when the oil prices had plummeted to negative at the beginning of the year, when the pandemic struck. Then why are the oil prices on a hike in the economy , is a contentious topic raging in the nation.

The high oil prices have led to disconnections among the people, including the prime minister who recently lamented India’s dependency on the import of  foreign oil. Back in 2015 the government had showcased its strong determination to reduce its ominous dependency on foreign oil and thus had chalked out a plan to rectify it . The plan outlined  had projected to reduce India’s import dependency from 77% in 2013-14 to 67% in 2022.

The current scenario bears testimony to the fact that this has not been the case and the government has failed miserably in achieving its ambitious sustainable goal. As a matter of fact, it was reported that in 2018-19 India’s import dependency stood at a despicable 83%.

To add to the rueful tale of India’s import dependency is the incompetence and inactiveness of the government to reap the benefits of the falling oil prices . For instance, global crude prices had been reported to have plummeted to $19 per barrel from the highs of $66 per barrel in early 2020. Then why didn’t the government reap its trickle down effect?

This is because the government rather saw an opportunity to shore up its finances. This is quite discernable reason as the revenue collections in 2020 were abysmal. The government was in immense need of funds to fund its functioning and expenditure, therefore the government increased excise duty by a record Rs. 10 per liter on petrol and Rs. 13 per liter on diesel . This was projected to raise Rs. 1.6 lakh crores for the government spending. This was done in collaboration with the states who meanwhile bumped taxes in tandem and together these extra charges  alone made up 55-60% of the final retail price.

It is to be also noted that the  hike in prices comes in long run compared to when the prices had actually plummeted in the beginning of 2020. This is due to the fact that the  oil exporting countries have adjusted themselves to limit production and  supply in a bid to push prices higher. This  undesirable step cannot be rebuked or reprimanded as the countries around the world are adopting self- protectionist policies , to serve their interests first amidst the pandemic.

But this comes as a challenge for the Indian government that has projected a fiscal deficit of 6.8% for the financial year 2021-22. Its pro spending agenda can only be fulfilled when the government’s finances are safely shored up . As the finance minister, Nirmala Sitharaman has left the tax slabs unchanged, government will now seek for alternate resources to finance its expenditure. But will this mean that the consumer will have to bear the final brunt, we’ll have to wait and watch.