Sunday snakes & ladders with petrol and diesel prices

Unimpressed with the marginal reduction in petrol and diesel prices on Sunday, and the promise of more to come, Congress MP Rahul Gandhi on Sunday tweeted, “ Just three days ago, I had requested PMO to pass on the benefit of the global oil price crash to Indian consumers by slashing the prices of petrol and diesel in India. Instead of heeding this advice, our genius has gone and hiked excise duty on fuel”.

Did the Government do a smart thing by increasing excise duty and not passing on the benefits to the consumers? Is Sunday’s token reduction too little and an eyewash? And what impact on the economy will petroleum prices leave?

The jury is still out as former Indian Express editor Shekhar Gupta tweeted on Sunday: “This is unpopular, so I brace myself.. Truth: Modi Govt is wise & strong to raise excise on petrol/diesel... Prices won’t rise much. In essence, Govt folds back the gains of falling crude to bridge deficit, Carbon…”

Others were not as sanguine as a Twitter user was quick to point out. The daily fluctuations in fuel prices have little impact on prices of goods and once input costs go up and goods become expensive, it would drill a hole in the pocket of consumers and leave them with less money. This would also hamper exports and neutralise the benefits of a weaker Rupee in the forex market. The cumulative effect could be to increase the deficit and not reduce it, he pointed out.

On Sunday Petrol in Delhi was selling at ₹69.75 per litre, while diesel was priced at ₹62.44. Delhi has the lowest fuel prices among metros because of lower state taxes.

The government had on Saturday hiked excise duty on petrol and diesel by a steep ₹3 per litre each to garner about ₹39,000 crore additional revenue as it repeated its 2014-15 act of not passing on gains arising from the slump in international oil prices.

Following Friday's notification, excise duty on petrol went up to Rs 22.98 per litre, while on diesel it went up to Rs 18.83 per litre. This represented a 142 per cent increase in duty on petrol since April 2014 and a 318 per cent increase on diesel