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With inflation raging at an all-time high, this was the wrong time to hike fuel prices
Vishwa Bandhu Gupta
Former Additional Commissioner, Income Tax
The mounting public anger over the constantly increasing fuel prices is making New Delhi very nervous. Yet, it might seem that several important ministers in this government are suffering from some mental condition that compels them to repeatedly revert to the oil price issue much in the manner of a needle stuck on a cracked gramophone record.
First, in this year's Union Budget, Pranab Mukherjee hiked the prices of petrol and diesel, and then petroleum minister Murli Deora raised them even further. As if these were not enough, Manmohan Singh then went ahead and completely linked the price of diesel to international prices. This came after the PM had announced last June that he was not going to link diesel to international processes. The aam aadmi is at the receiving end of this blatant volte-face.
After fuel prices shot skywards, Opposition parties initiated a strike that hit normal life in the country for a few days. Schools closed down, businesses shut their doors and transportation ground to a halt with many flights and trains being cancelled. Even the nation's biggest trucking union sided with the strike, further complicating matters. But what the Opposition parties failed to do was call the government's bluff. The government was garnering Rs 100,000 crore as import and excise duties on gas and petroleum and subsidising Oil Marketing Corporations (OMCs) only to the extent of Rs 70,000 crore. If you take the gallon rate of petrol and diesel in American gas stations and convert that price into Indian rupees, the petrol rate comes to about Rs 37 per litre and the price of diesel to not more than Rs 24 a litre.
Governments the world over are doing their best to starve off fiscal deficit. India has taken to upping the cost of fuel to cover its overheads. The blunt truth is that it should bring down the import and excise duty for petrol and diesel to a near zero rate. The Indian people are being misled, cheated and completely lied to. The government covers the losses of OMCs but keeps silent about the nearly Rs 100,000 cash garnered by the ministry of finance. India's aam admi is being told the story of losses and not that of profits. The government might go to the extent of linking even cooking gas cylinders to international prices. The bottomline is that UPA-2 is working for the interests of big business. Petroleum price as quoted in the news generally refers to the spot price per imaginary 'barrel' (159 litres) of either WTI/light crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma, or of Brent as traded on the Intercontinental Exchange for delivery at Sullom Voe. The price of a barrel is dependent on both its grade, determined by factors such as its specific gravity or API and its sulphur content and its location. The vast majority of oil is not traded on an exchange but on an over-the-counter basis. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration (EIA) uses the imported refiner acquisition cost, the weighted average cost of all oil imported into the US, as its 'world oil price'.
The demand for oil hinges on global macroeconomic conditions. According to the International Energy Agency, high oil prices generally have a large negative impact on global economic growth. Others argue that the run-up in oil prices over the past few years actually led to an acceleration in global growth. The huge surpluses built up by oil exporting countries were recycled through sovereign wealth funds and the banking system greatly increased investments in emerging markets and helped hold down interest rates in the US.
China's oil demand and growth may be making headlines, but the world's fifth-largest crude oil producer is undergoing decelerating growth in oil consumption and is more a price taker than a price driver, says a new report. Only 19 per cent of China's energy needs are met by oil and the country's oil dependence is weakening. China expects lower consumption growth due to economic rebalancing and efficiency improvements. Oil demand in the rich, industrialised countries of the West already appears to have peaked and the trend in developing economies is toward an ever-smaller increase in the amount of oil consumed for every extra unit of economic growth. In India we have failed to undertake basic oil price reforms. Do away with excise on hybrid vehicles of mass transportation, and lower taxes on such cars. Make Indian Railways run on electricity grids that consume little energy.
Oil prices, in future, given the current bad shape of OECD economies, can only fall and not rise. This was just not the time for increasing oil prices. Food inflation is running at 20% at wholesale prices and 90% people do not have full two-course meals to eat.
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With inflation raging at an all-time high, this was the wrong time to hike fuel prices
Vishwa Bandhu GuptaFormer Additional Commissioner, Income Tax
The mounting public anger over the constantly increasing fuel prices is making New Delhi very nervous. Yet, it might seem that several important ministers in this government are suffering from some mental condition that compels them to repeatedly revert to the oil price issue much in the manner of a needle stuck on a cracked gramophone record.
First, in this year's Union Budget, Pranab Mukherjee hiked the prices of petrol and diesel, and then petroleum minister Murli Deora raised them even further. As if these were not enough, Manmohan Singh then went ahead and completely linked the price of diesel to international prices. This came after the PM had announced last June that he was not going to link diesel to international processes. The aam aadmi is at the receiving end of this blatant volte-face.
After fuel prices shot skywards, Opposition parties initiated a strike that hit normal life in the country for a few days. Schools closed down, businesses shut their doors and transportation ground to a halt with many flights and trains being cancelled. Even the nation's biggest trucking union sided with the strike, further complicating matters. But what the Opposition parties failed to do was call the government's bluff. The government was garnering Rs 100,000 crore as import and excise duties on gas and petroleum and subsidising Oil Marketing Corporations (OMCs) only to the extent of Rs 70,000 crore. If you take the gallon rate of petrol and diesel in American gas stations and convert that price into Indian rupees, the petrol rate comes to about Rs 37 per litre and the price of diesel to not more than Rs 24 a litre.
Governments the world over are doing their best to starve off fiscal deficit. India has taken to upping the cost of fuel to cover its overheads. The blunt truth is that it should bring down the import and excise duty for petrol and diesel to a near zero rate. The Indian people are being misled, cheated and completely lied to. The government covers the losses of OMCs but keeps silent about the nearly Rs 100,000 cash garnered by the ministry of finance. India's aam admi is being told the story of losses and not that of profits. The government might go to the extent of linking even cooking gas cylinders to international prices. The bottomline is that UPA-2 is working for the interests of big business. Petroleum price as quoted in the news generally refers to the spot price per imaginary 'barrel' (159 litres) of either WTI/light crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma, or of Brent as traded on the Intercontinental Exchange for delivery at Sullom Voe. The price of a barrel is dependent on both its grade, determined by factors such as its specific gravity or API and its sulphur content and its location. The vast majority of oil is not traded on an exchange but on an over-the-counter basis. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration (EIA) uses the imported refiner acquisition cost, the weighted average cost of all oil imported into the US, as its 'world oil price'.
The demand for oil hinges on global macroeconomic conditions. According to the International Energy Agency, high oil prices generally have a large negative impact on global economic growth. Others argue that the run-up in oil prices over the past few years actually led to an acceleration in global growth. The huge surpluses built up by oil exporting countries were recycled through sovereign wealth funds and the banking system greatly increased investments in emerging markets and helped hold down interest rates in the US.
China's oil demand and growth may be making headlines, but the world's fifth-largest crude oil producer is undergoing decelerating growth in oil consumption and is more a price taker than a price driver, says a new report. Only 19 per cent of China's energy needs are met by oil and the country's oil dependence is weakening. China expects lower consumption growth due to economic rebalancing and efficiency improvements. Oil demand in the rich, industrialised countries of the West already appears to have peaked and the trend in developing economies is toward an ever-smaller increase in the amount of oil consumed for every extra unit of economic growth. In India we have failed to undertake basic oil price reforms. Do away with excise on hybrid vehicles of mass transportation, and lower taxes on such cars. Make Indian Railways run on electricity grids that consume little energy.
Oil prices, in future, given the current bad shape of OECD economies, can only fall and not rise. This was just not the time for increasing oil prices. Food inflation is running at 20% at wholesale prices and 90% people do not have full two-course meals to eat.
For More IIPM Info, Visit below mentioned IIPM articles.
INDIA'S BEST COLLEGES, INSTITUTES and UNIVERSITIES
IIPM BBA MBA Institute: Student Notice Board
Ragging rights and wrongs
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