While international oil prices are falling steeply for the past four months, surprisingly only a tiny fraction of this has been passed onto the consumer. In fact, oil prices have fallen from about US$ 110 in June, 14 to a low of US$ 27 last month, a decline of over 75%. Yet consumers in India have seen retail prices decline by just a fraction – 15%. How come?
A comparative analysis shows how the central government is shortchanging the energy consumers in the country. International prices have fallen by about 75% between July, 14 and January, 15. Yet surprisingly, only 15% of this fall in prices has been passed on to the consumers by the oil companies. This is because with almost every fall in prices of crude oil our Government has been hiking the excise and basic duties to increase its resources. India imports about 80% of its oil requirements.
The central government has taken advantage of falling international oil prices to hike excise and basic duties on petrol and diesel upwards of 35% in case of the former and a huge 140% in case of the latter during the last three months. In fact, excise duty hikes on petrol and diesel have accounted for a major portion of additional resource mobilization undertaken by the central government during the past three months.
The government has resorted to excise and basic duty hikes five times since November, 15. Indians are paying twice as much for petrol and diesel compared to global consumers. If the purchasing power parity (PPP) is taken into account, we are paying even much more. The government seems to have no concern for its citizens, who earlier bore the brunt of the global price increases between 2010 – 2013.
Awareness has to be created among the people of how the government is gobbling a major portion of the price fall instead of passing it on to the retail consumer. A major area of concern is the probability of international oil prices heading north once again by 2017-18. Some oil experts are predicting that international oil prices could rise up to US$ 70 by 2018. What would the government do then! Would it absorb part of the hike by reducing basic duties? Or pass the entire hike to the hapless consumers?
