Nirmala Sitharaman is once again blaming the rise in international oil prices as a consequence of the Ukraine war for hiking fuel prices in India just after the results of the Assembly elections were announced on 10th March.
India buys its oil in the framework of long term contracts with oil producing countries which are not less than 3 years duration but typically of 5 years term. There may be some short term buying of oil in the spot market as balancing purchases to meet temporary shortfalls. Thus any sharp increase in international oil prices will not affect India purchases and need not be reflected in fuel prices in India. Does the FM want us to believe that just like buying vegetables, she goes out every day to buy fuel for the country? Clearly she is bluffing us. Thus any increase in international oil prices consequent of the Ukraine war should affect us 3-5 years down the road since our long term oil buying contracts are in place. What has happened in India is that a conditioning has been achieved in creating an expectancy that fuel prices have to be raised whenever international oil prices move up. Remember this principle is not true when prices of oil fall abroad since then rarely India fuel prices are brought down. Initially this price adjustment mechanism was handled by the Petroleum Ministry and over the last few years have been passed on to the OMC’s (Oil Marketing Companies) in the public sector. The idea behind this is to deflect the public ire whenever fuel price hikes happen.
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The Ministry shrugs off its responsibility saying the price changes are handled by the OMC’s and it is their commercial decision! This is surprising since we elected legislators to whom we are expected to go for relief but then we are passed to commercial entities whom we never elected! The other thing is that fuel is used as a cash cow by both, Central and State governments who tax it heavily and average taxes are in the region of 45-50%.
The Central government imposes customs and excise duties on imported oil and States add sales tax on it to increase the burden on the consumer. Is it not the responsibility of both governments when there are sharp increases in international oil prices that they should have an automatic mechanism to review the duties and taxes they impose on oil so that the burden on the consumer is cushioned?
This unfortunately is not how our governments work since now the elections are over, the need for votes is deferred by at least another 5 years or until the next elections come along, so until then they can like the proverbial dhobi’s donkey, in this case the hapless Indian consumer, can load it until its legs buckle and it falls to the ground.
During such times you will not see any government flunkey, Nirmala Sitharaman included, in any public forum commenting on what they did, why they did it on any matter which adversely affects the people of this country.
