Petrol-diesel price hike: Government must focus on real solutions, not bizarre graphics, to ease common man's pains

The ongoing race between the rupee and petrol prices to cross the century-mark ruthlessly exposes the sheer unpreparedness of the government in managing the fuel price situation. At the time of writing, petrol prices are nearing Rs 90 per litre in Mumbai and diesel is retailing at near Rs 80 per litre. Until now, the Central government doesn't seem to have a solid plan to contain the fuel price hikes.

At record-high levels, high petrol and fuel prices are creating nothing but panic among the general public that will exacerbate the situation when consumption spikes in anticipation of future hikes and Opposition parties use the opportunity to throng streets with protests, creating further panic. As far as petrol prices are concerned, the government has to come up with any solutions to hold back the price rise.

Instead, the ruling party has circulated a ridiculous bar chart to justify the government performance on fuel price management and create confusion. On Monday, the BJP’s official Twitter handle put out graphics to downplay the fuel price hike that gave an impression of decline, at least going by the plotting of bars in the graphics, by showing a downward arrow to depict a rise in prices of petrol and diesel.

It wanted to show the percentage increase in fuel prices during the UPA era as being higher than in the NDA era — which is correct, but by putting a lower bar to show a higher price, the graphics appeared ridiculous and conceived as if to give a false impression to the audience that there is actually a decline in the fuel prices during the Narendra Modi tenure. Logically, the misrepresentation has come under heavy attack by Opposition parties and social media users. This is cruel joke to tell the common man reeling under the pressure of high fuel prices.

The high fuel prices are causing severe hardships to the common man and will have a cascading impact on prices across goods and services in the not-so-distant future. It is highly unfortunate if the ruling government opts for useless optics to downplay the problem and make a political issue out of it instead of coming with actual solutions. The government has already ruled out excise duty cuts in response to the agitations nationwide, but has failed to offer alternate solutions.

Representational image. Reuters.

Representational image. Reuters.

Right now, the Central government levies total excise duty of Rs 19.48 per litre of petrol and Rs 15.33 per litre on diesel. On top of this, states add their levies. The Modi government should initiate dialogue with state governments to bring down part of the levies both in Central and state share. Some state governments, such as Andhra Pradesh and Rajasthan, have already done this. Chalking out a permanent formula to rein in the fuel prices is critical given that any significant softening in global crude oil prices is unlikely. Brent crude is trading at $77 per barrel.

Merely highlighting the statistical difference in terms of percentage increase during UPA and NDA rule won't alleviate the pain of the common man. It is well understood why the government is hesitating to cut the excise duty to bring down petrol prices — every Rs 2 cut will inflict a Rs 28,000 to 30,000 crore hit on exchequer. But, if the government doesn't act now, the costs will be even higher.

Higher fuel prices, if they sustain, will lead to persistent high rates of inflation (we have seen enough evidence in the past), which is good enough to scare the monetary policy committee and force a rate hike. A rate reversal at this stage, when the economic recovery is still nascent after demonetisation, GST and global shock impacts, will be counter-productive. This will boomerang badly for the Modi government both politically and economically. There is no use of going in for an ugly political mudslinging trying to prove who messed up worse, when the common man is feeling the pinch of fuel price rise.

The government must prioritise real solutions over ridiculous optics.

Updated Date: Sep 11, 2018 13:26 PM

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