COMMENT

Price Hike Has Nothing To Do With World Oil Price

ALL those who are genuinely concerned with world crude oil price going up beyond 50 dollars/barrel would be surprised to know that present price hike in diesel and petrol effected by the UPA government has little to do with crude price but mostly to neutralise the  enhanced excise duty (including cess) imposed in this year’s budget. To be precise, the components of price hike of Rs 2 per litre for diesel and Rs 2.50 per litre for petrol are as follows:

                   Petrol                                           Rs /litre

            Enhanced excise duty                          2.20

            Quality improvement                          0.30

                                                                             ------

                                                                             2.50

                   Diesel

            Enhanced excise duty                         1.06

            Quality improvement                        0.24   

            For global price hike                          0.70

                                                                           -----

                                                                           2.00

Thus if the government had agreed to the Left parties suggestion to rationalise the tax structure, the price hike  in petrol would have been totally avoidable. In the case of diesel, formation of price stabilisation fund of Rs 5400 crore per annum collected from the crude produced by ONGC and Oil India Ltd (OIL), which is not being used for petroleum sector, could have taken care of the 70 paise/litre hike on account of global oil price rise, without affecting the public sector oil companies.

The two charts below show that out of retail selling price of Rs 40/- litre for petrol, Rs 23 is being paid as taxes and duties of one kind or other. In the case of diesel, the tax duty component is approximately Rs 10/litre for the retail price of Rs 28.45/litre.

Public opinion has to be mobilised against the ongoing tradition of mopping up the resources at a cascading rate from oil sector taking advantage of international crude oil price hike at the cost of the common man. As against the Rs 28,013 crore collected as excise duty in 2001-2002, the government has collected Rs 43,662 crore in 2004-2005 (provisional). Can this practice of putting a double burden of both increased crude oil price and enhanced duty/tax on consumer, be allowed to continue?

Statement showing share of taxes in Retail Selling Price of Petroleum Products

(Figures give the components of customs duty, excise duty and sales tax as a % of SN. 6)