Fueling politics

AuthorPublished: 12th Sep 2018  12:20 amUpdated: 11th Sep 2018  8:49 pm

As the common man is bearing the brunt of the skyrocketing prices of petrol and diesel in the country, political parties are adding fuel to the fire by resorting to blame-game and finger-pointing. No one seems to be acknowledging the elephant in the room: bringing petroleum products under the ambit of Goods and Services Tax (GST). While the NDA government is citing international factors for the soaring fuel prices, the opposition-sponsored ‘Bharat Bandh’ on Monday to protest against the rise in prices of petroleum products only served to score political brownie points. It is just the role reversal for the parties; the BJP and other parties had staged similar protests when fuel prices went up during the UPA rule.

It is time India moved towards a bipartisan policy on petroleum pricing because the harsh reality is that the country is totally dependent on fuel imports to meet the demands of a growing economy. While deregulation of petroleum prices makes economic sense, it is always tricky for the government of the day to justify it in a politically sensitive country like India. Since India does not have the required fiscal legroom, it is near impossible to insulate the domestic oil prices from fluctuations in international oil price and exchange rate. Given the constraints, such a policy will have a disastrous impact on the fiscal balance. The rising fuel prices will have a cascading impact on transportation costs which will, in turn, push the prices of essential commodities, further burdening the common man.

What is particularly appalling is the callousness of the NDA government in the face of growing public angst over fuel prices hitting the roof. The two-day national executive meeting of the BJP, ahead of the ‘Bharat Bandh’, skirted the key issue of fuel prices as the proceedings were more of a self-congratulatory exercise. There was no discussion on the strategies to check the price rise nor was there any assurance on softening its impact. The abnormal increase in fuel and cooking prices in the last three years makes a mockery of the ‘achhe din’ promise made by the BJP in the run-up to the 2014 Lok Sabha polls. Bringing petroleum products under the purview of GST will significantly reduce prices, by Rs 15 to Rs 18 per litre, but it is also a double-edged weapon as it would lead to substantial erosion of revenue for both Central and State governments. While some States may be willing to make sacrifices to a limited extent by reducing taxes on petroleum products, it would be unfair to expect the States with poor levels of economic development to do so because fuel tax remains one of their key sources of revenue.