Sunday, December 5, 2021

Soaring petrol prices: Why Indians need to stand with Modi at this hour





Nobody likes rising petrol prices. Me or you, nobody. You could go to town about how it could reduce consumption, increase use of solar panels and electric vehicles, more absorption in public transport including metro trains but the truth is nobody likes soaring fuel prices. 

It could comfort some in a party with their high-brow quips that India imports 86 per cent of its energy needs, can’t subside beyond a point as it would raise debt and throw its noble budget of 2021, with all those investments in infrastructure in mind, into gutter. The truth is nobody like soaring fuel prices.

You could leave the arguers speechless, and a few in raptures among khaki-shorts in Nagpur, that shouldn’t Greta Thunberg or Disha Ravi applaud the rising fuel prices as a reduced fuel consumption would help the environment and the climate-change—now their well-funded profession, not to say the prima donnas twirl on global stage—would receive a lift. Yet nobody likes soaring fuel prices. 

You could arguably sift through the data of Congress regimes, and even scan through its present dispensation in a few States, to note that they have happily beefed up the fuel prices but prefer to blame it on the Modi’s Centre. So does Arvind Kejriwal.

Isn’t it a fact that while we blame Modi government for rising fuel prices, the prices are also the prerogative of States who prefer higher prices to suit their budgets. Or why petroleum products aren’t part of the GST of standardised rates? Aren’t the Centre-States partners in crime? 

The point is energy import isn’t just restricted to us middle class with our scooters and cars. It affects your bus and train fares too. Besides, the term used is POL (Petroleum and Other Lubricants) which should give you an idea of the damage all around. Energy is our lives. It’s just not your filled tanks in gas stations. 

The truth is taxes on POL are government’s biggest money spinner. A data, two years ago, detailed that 56% of Indian government’s revenue comes from taxes on these products. And this has been for decades. The next best comes from tobacco products: 8.8% ! Iron and steel bring in 8.45% and cement at 5.45%. So this is how important rising fuel prices are for the government coffers to sell its budget and plans embedded in it. In essence to keep the country running. 

What if the government subsidies this burden on its citizens? One, as said, national debts would soar further. Two, the Centre would’ve no option but to increase the income tax on us. The income tax is a direct tax and the Centre could do as it wants. The taxes on petroleum products, on the other hand, are indirect taxes—which are pretty fixed under GST. So are you for hike in Income Tax?

How the Modi government intends to tackle this acute headache? For one, it has increased the blending of ethanol in fuels. What was one per cent mix at the start of the Modi regime, has now ballooned to 6 per cent. It could go further. Nitin Gadkari went away from the petroleum ministry saying that if ethanol plants pick up, and fuel is generated from paddy and wheat straw, sugarcane and municipal waste, the diesel could be sold at Rs 50 and petrol at Rs 55. But try telling this to our Rakesh Tikaits and other andolanjeevis. 

Then there is International politics which our economists and OpEd writers in Indian Express and The Hindu etc are careful not to mention. They blank it altogether. The truth is petroleum industry is big in the United States. Indeed, it would not be wrong to say that if the US economy is booming, it’s because its domestic oil sector is booming. It needs the crude oil price to stay high to generate profit and afford huge employment—both necessary for anyone who sits in the White House. 

Let’s look at the biggest oil producers in the world: The United States has a global share of 14% plus; Saudi Arabia 12%; Russia 12.2%, Iran 5.4% and Canada 5.2%. Iraq has 4.9%, UAE 4.2% and Kuwait 3.3%. Russia and Iran, needless to say, are hampered by crushing economic sanctions which US has slapped on them for years. 

Now this US profits on its huge global oil share could only be maintained if the crude oil supply is reduced in other parts of the world, or say primarily in Middle East which is a giant oil exporter to the world. (There are Russia and Venezuela also but we would leave that out for the moment). That’s why the United States never wants to leave the Middle East. Since it can’t dictate to Saudi Arabia—whose funds are important for US economy too—it arm-twists Iran which is a huge oil producer in its own right. Indeed, there are many giant oilfields being discovered in Iran everyday. The United States would be happy if nobody buys Iran’s oil so that supply could be controlled and demand could remain high, for its own economy and job generation. This tap from Iran, incidentally, has run dry for India due to US stance. 

The happy days for India when it used to sell its pharmaceutical products and shoes to the USSR which in turn used to supply arms to Iraq’s Saddam Hussein which in turn used to sell oil to India is long gone. Since 1990s, there’s a huge jump in Indian oil consumption. But the production is stuck in old groove. Over the past two decades, India’s domestic production has hovered slightly below the 1mbpd (thousand barrels per day) mark. The United States in contrast produces 13.1 billion mbpd!

The prime minister Narendra Modi, the other day, bemoaned the lack of initiatives of previous governments in managing India’s energy needs and supply. The above insight could help explain his exasperation at no initiative from previous governments to reduce energy imports and increase domestic production. Or establishing alternative sources of energy. Of developing an Energy Policy for the country. Now the monster is in the drawing room, stopping India from breaking free on its Atmanirbhar drive. 

So the choice, for us consumers is clear. Should we support the Politics or Policies. If Politics is your goal, keep filling your tanks, keep driving out on your weekend vacations, and keep cursing the Modi government for rising fuel prices which anyway has made no difference to your lifestyle. Or if you are an evolved Indian, wishing to lend your shoulder to Policies, get the drift on domestic and international compulsions and do your bit in opting for alternative energy sources and public transport etc. To tell the ruling dispensation in the Capital: We understand you and We would do what We should. 

 


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