Petrol and diesel prices touched new highs on Sunday. While petrol prices are hovering around a four-year peak, diesel had never been this expensive in India. International prices have risen steadily due to strong global demand in the past year, and with the producing countries, including Opec and Russia, agreeing on supply cuts to curb what was an oil glut for four years. This isn’t good for an oil-importing nation like India whose fuel import bill shot up to $88 billion in 2017-18, from $70 billion the previous year. Pump prices are now determined by market forces, not administered, but as the oil importers are mainly state-owned companies, they can’t reduce prices as governments impose heavy taxes, amounting to almost half the selling price.
We seem headed back to the days before the 2014 polls when there was huge public anger over administered prices going up on a fortnightly basis. Consumers’ woes at the pump are bound to be reflected in their angst as the government seems determined to mop up revenues to balance its books, and tend to its fiscal deficit than rising fuel prices. Steeper inflation from rising diesel prices will have a cascading effect and bank lending rates will have to be rigid as well. Not even BJP state governments are willing to reduce VAT on fuel. The Centre too isn’t ready to sacrifice more excise after showing alacrity in mopping up revenue when international prices were very low. Indians meanwhile must put up with the highest fuel prices in South Asia, and to add insult to injury, are paying a few paise more daily with the revision of prices every 24 hours.
