A short-term relief

The Central government has slashed the excise duty on petrol and diesel for the second time in its tenure. The first cut of Rs 2 per litre was effected exactly a year ago. While the stated reason for such duty reductions is often the same — to protect the interest of the common man — it is plain that the action is aimed at political gains. The decision to slash the duty on petrol and diesel on October 3, 2017, was apparently a political compulsion ahead of the Gujarat election. This October, the same government has once again sacrificed Rs 1.5 per litre in excise duty on automobile fuel because the ruling BJP is looking at three important Assembly elections, to be followed by the crucial general election. This should explain the instant falling in line by the BJP-ruled states, with most of them following the Centre’s example. People may well thank frequent elections for such occasional respites!

Until recently, the Finance Minister had summarily rejected the demand to check the fuel prices on the plea that the rise was because of international factors beyond his control, and an excise cut would seriously hamper the ongoing welfare programmes. What, then, made him change his mind? Now he has even suggested that the cut would not have any significant implication, as it would amount to only 0.05 per cent impact on the country’s fiscal deficit.

While the excise cut may be welcomed as something long overdue, the decision to force state-run oil companies to bear a Re-1 per litre burden is regressive. This is an official admission that the reform of deregulating petrol and diesel rates has been a sham. Instead, the government should have taken the entire Rs 2.50 per litre hit, and initiated a technical examination of the retailers’ pricing methodology, which appears to be vague and inflated at times. It is puzzling that fuel prices in neighbouring countries such as Pakistan and Bangladesh are much lower. Undoubtedly, a comprehensive petroleum pricing policy is due.