As I’ve always maintained, Indian democracy is a joke. A bunch of half-educated knaves pretending to run a nation as they fill their pockets too heavy to even flee when caught. Sometimes, corruption seems acceptable, when you look at the way they rob us in broad daylight, I’d prefer to be blissfully ignorant about being robbed rather than nearly violated in full public glare. I am referring to the petrol price hike. I sound so pissed off because I recently bought a new bike, which isn’t that great on the mileage front to begin with, and then they pushed the prices up and now my bike kicks it in the garage gathering dust and mosquito poop. It’s not funny, really. To add to that, after increasing the prices by almost 10% overnight, they roll it back partially by just Rs. 2 per liter, insulting our intelligence, believing we are stupid enough to not notice the cumulative rise in price.
Anyway, after the hike, a lot of questions were obviously asked and the government came out with the same humdrum answers they’ve almost mugged up I guess, over the last 2 years. Recession, Rupee devaluation and same all old crap I am almost sick of listening to. They have enough money to not enforce austerity measures in a recession-hit nation but they will tax petrol because they can’t think of anything better to do to run the country. On the contrary they claim we aren’t hit, that the ‘India Shining’ story is still happy. And they say all this after the massive drop in the GDP, from the previous levels of 8.5% to the abysmally low 6.9-7.1% levels. And even this in my opinion is an overly optimistic estimate designed to stop the stock market from crashing.
Getting to the point, they say that taxes on petrol had to be increased to bring revenue to the government to compensate for the loss making Oil Public Sector Undertakings (PSUs). I mean, this is almost a direct contradiction, first they impose excise and customs on the same oil that these companies make their business from due to which they make the losses they do, and then they add more taxes to compensate for the losses that have been incurred by the taxes to begin with. Yes, that’s how our government rolls.
Tax companies to the point of losses -> Then tax them some more to compensate for those losses. It’s no wonder that corporate governance and FDI in the oil sector is almost non-existent in PSUs.
They give us Communistic bullshit like they don’t want to “subsidize the rich for their petrol cars”, but the fact of the matter is every middle class working individual owns some kind of a vehicle. If not that, then they use public transport,the cost of which fluctuates so ferociously that even though a lot of the transport services have switched to CNG, the impact of a hike in petrol prices is significant enough.
Also, if we deconstruct the price of petrol per liter, you’ll be astonished to know how much of it actually goes to the government.
Here’s the math,
Let us assume the price of crude oil per barrel to be 100USD, which is the mark at which it usually hovers.
Another statistical assumption that we’ll make is that the 1USD = Rs. 56, which is again the rate at which the rupee is at currently, incidentally this is its worst value ever.
This makes a barrel of crude oil cost Rs. 5600/barrel.
A barrel consists of roughly, 150 liters of petrol, this is an average considering all possible variations.
The total of all other costs involved in converting crude to Petrol – which includes transport of crude and refined products, cost of refining, reasonable refining margin for the refinery, fuel used by the refinery, dealer commission, etc. – is approx. USD 12, which works out to Rs. 672 per barrel.
So, petrol should actually cost us, (5600+672)/150 = Rs. 42 per liter!!!
The current price, after the partial roll back is around Rs. 75 per liter, that means we pay the government Rs. 33 for every liter of petrol we buy. That’s a whopping 44%!!!
Now, diesel is a lot cheaper than petrol in all the above aspects, is ‘subsidized’ by the government and still costs Rs. 41-42 per liter. I wonder how much the government makes from diesel.
This calculation is not rocket science, and anyone interested/affected will do these calculations to figure out what the government is doing. Also, when the government says that this forced by the drop in the value of the rupee by about 10% has been more than offset by the 20% decline in global crude oil prices. This is also not an environmental protectionist move like other nations which have imposed carbon and energy taxes to arrest fossil fuel utilization. This is just plain old robbery like I first said, and unfortunately for the UPA, everyone knows it. In fact, this became even more evident when the petrol prices in Goa were slashed, yes slashed by a whopping Rs. 11per liter!!!
That’s why the UPA suddenly looks so brittle. Mamata Bannerjee has been blowing all recent government revenue generation schemes to smithereens. While, in my opinion, she was unreasonable about the roll back of the railway budget, she’s more than correct about the petrol price hike. Even DMK, which has been a staunch ally of the UPA has given intermittent feelers or discontent with the UPA’s petrol price hike decision. Although, this is just a defence mechanism of regional parties trying to maintain their supremacy in their respective regions, it exposes the self-destructive nature of the UPA’s policy. In fact, the DMK even lost its last elections in the state owing to their alliance with the UPA, and the corresponding discontent of the people of the state with the leadership at the center.
So, it is quite evident that sooner or later, the government is going to crumble if they continue on this suicidal run that they’ve had off late. Regional alliance are fair weather friends anyway, and so UPA’s deathwish may soon fulfill itself.
Links for more information:
http://www.firstpost.com/politics/economy-needs-petrol-price-hike-bharat-bandh-is-just-wrong-327147.html (A counter view)