I lament why has the government increased diesel price by Rs.5?
Instead, it should have increased it by Rs.20, and then rolled it back to Rs.17. And the very
next day, made a couple of announcements:
1. Offered a special one time DA of Rs.5,000 to all its employees to help them meet the diesel ka jhatka; asked the private sector to do likewise, compensating them by letting them get a tax rebate on the amount; and increased minimum wages by 10%. This would have blunted opposition and the shock.
2. Next, deregulated diesel, letting market forces govern the price henceforth.
3. Further, standardised the taxes on fuel. Current taxes on petrol, for example, total about Rs.35! These include basic Excise Duty, Additional Duty, Special Additional Duty, Cess, Additional Cess and lastly, the exorbitant State Sales Tax – adding up to Rs. 35-40 per litre of Petrol. Actually, fuel is being taxed higher than even liquor and cigarettes!
- Irrespective of how much the fuel price is increased by – Rs.2, 5, 10 or 20 – the opposition party’s have standard, predictable reaction – slam the government, demand the PM’s resignation, push for fresh elections, and of course execute a complete bandh. So, what’s new!
- Market driven fuel prices can bring a lot of prosperity to India. Quickly! Sample these:
- Instead of compensating over Rs.100,000 crore to oil companies for the loss on account of fuel subsidization, the government can use the same money for building infrastructure, especially power. Even today, 24 hours of non-stop power is luxury for cities like Bangalore and Hyderabad.
- Market driven price is bound to attract several big private oil companies, including Reliance and Essar. Thousands of new petrol bunks will bring more employment, and reduce the distance between home and nearest fuel station (matters a lot to those who live in distant small towns). This would also impact service as well as quality of fuel. Riding on better quality fuel, our vehicles will squeeze more from every litre, bringing significant savings in importing oil.
- The move will bring in several foreign players to invest. Shell is already here, but holding back investments; Exxon, Mobil, to name a few. Talk of FDI.
- Entry of foreign companies will not only get us FDI but also bring our oil import bill down. These companies will bring oil into India, refine it here and sell it, but take away only a fraction back as profit. To illustrate: India’s Oil’s profit margin on Rs. 230,000 crores of sales is a mere 5%.
- Do you know Reliance has far better and higher capacity to refine oil than Indian Oil? Market driven prices will let public sector companies invest in improving efficiencies consequently lowering their cost, and improving profit margin.
- With little difference between petrol and diesel prices, we’ll see automobile demand rationalise. We’ll see a shift back to petrol vehicles, which will help keep the air cleaner.
- Oil companies, in happy days, contributed over several hundred crores a year as profit tax and dividends to government, its owner. Lately, they’ve been behaving like spoilt son-in-laws, only sucking their father-in-law. Their profit contribution will reduce pressure on government budgetary fiscal deficit, allow it to reduce taxes and rein in higher prices.
- Profitable and healthy oil companies (both public and private sector) can then go and build businesses outside India, making our economy healthier. There are already so many examples of Indian companies repatriating profits back home.
- Competiion will do what competition does – it will bring prices down. Once the market forces take over, no oil company will be able to increase price unless costs increase for all of them. Level playing field will make them consumer-oriented, nimble and efficient. Else they’ll perish.
- Competition will bring consumer friendly offers. Expect offers like: refuel 4 times a month and get Rs.100 off; or, load Rs.10,000 in pre-card fuel card and get 5% extra top-up free; or, free car wash after every 12 refuels.
Instead of making common people suffer, market driven oil prices will make common men smile, as all of us, soon enough will be paying for fuel the price that the rest of the world pays!
Now isn’t that what we all always wanted?