Petrol Price Hike – Adding to Common Man's Woes

As we will see below, the argument of under recoveries of the oil companies is only a part of the picture. The other part is that the Government kitty swells up every time petrol prices are hiked. And under recoveries are not the same as losses, as the Government would have us believe.

 

It is a curious phenomenon that when the prices of crude oil goes up, the petrol prices go up, but when the crude oil prices come down, the petrol prices come down much slower and by only small amounts. Not surprisingly, the oil companies have rarely made losses in any year, a loss during a quarter not withstanding. Yes, when prices go up, in some quarters the oil companies have made losses. This however has more than been made up in the quarters in which the crude oil prices came down but the petrol price did not. That is why in balancing petrol and crude oil prices, one does not look at only weeks at a time but in a longer time frame. The hurry in raising prices, makes one suspicious of Government's intentions – it is not just helping the oil companies but may also be helping itself.

 

How much does the Government gain if petrol price is raised? For every litre of petrol, the Government levies – centre and state – are roughly about 50%. Thus, every time the government raises the price of petrol claiming increase in crude oil prices internationally, it keeps 50% of the money for itself. The Government therefore has a vested interest in keeping the fuel prices high – it gets a cut if prices increase and loses revenue if the prices go down.

 

The other issue is that all the margins of the oil companies are indexed to the price of oil and not actual costs. For example, the actual refining costs do not change if the crude oil price changes, but the refining margin does the way the prices are computed now. That is why even in periods that oil companies are supposedly making under recoveries, they have ended up making profits.

 

As diesel and LPG, prices are not raised the correction for crude oil price is through the petrol price hike. While this makes sense as diesel is used for public transport and freight, it makes no sense when we also allow SUVs and luxury cars to use diesel. A simple way of plugging this leak is to levy a cess on all private diesel vehicles and add it to its price.

 

The problem with this Government is that it is the most ideologically committed Government for helping the rich. That is why the huge loot of land, mineral wealth and 2G spectrum – all to help the capitalist class. The petrol price hike coming on top of the current inflation shows how little this Government cares for the common man.