Fuel prices rise for 10th day, government assures "long-term" measure
What's the story
Even as petrol/diesel prices increased for the 10th day, the government again assured relief, with Law Minister Ravi Shankar Prasad batting for a "long-term" solution instead of an "ad hoc measure."
However, Road Minister Nitin Gadkari warned that subsidizing fuel could adversely impact welfare schemes.
In 2008, prices crossed Rs. 70/L when international-rates hit $140/barrel; now it's $80, but fuel-prices have surpassed 2008 figures.
System
How are fuel prices determined in India?
In June'17, despite opposition from the All India Petroleum Dealers' Association, the government enforced the dynamic fuel pricing policy based on "positive feedback on a pilot project."
Under this system, domestic fuel rates are tied to international prices, so that any hike or cut in the latter is immediately reflected on the former.
Before that, prices were revised fortnightly to reflect international prices.
Crisis
What's happening now?
Prices were kept on hold for nearly 20 days before the Karnataka elections earlier this year. They started rising continuously from two days later.
In the last 10 days, petrol prices have gone up by Rs. 2.54, and those of diesel by Rs. 2.41.
Yesterday, petrol was selling at Rs. 77.17/L in Delhi, and diesel at Rs. 68.34.
Do you know?
Why are fuel prices going up?
Analysts have blamed the scenario on several factors, including production cuts by the Organization of Petroleum Exporting Countries amid increasing demand, and a steadily falling rupee. US sanctions on Iran, one of the biggest oil producers in the Middle East, has compounded the problem.
Protests
Opposition parties announce protests in different states
As the crisis unfolded, the opposition lashed out at the government. Congress asked why prices were going up despite a fall in international rates, and has announced a protest in Mumbai tomorrow.
The BJD in Odisha has also declared a state-wide stir during May 28-30.
General Secretary Sanjay Dasburma said the Center could cut excise duties, "but instead it's asking states to reduce VAT."
Quote
The Center could cut petrol price by Rs. 25: Chidambaram
"Central government saves Rs. 15/L of petrol due to fall in crude-oil prices. Central government puts additional tax of Rs. 10/L. Bonanza to central government is Rs. 25/L. This money rightfully belongs to the average consumer," tweeted former finance minister P. Chidambaram yesterday.
Government
This government has displayed alarming alacrity while raising prices
Stakeholders have pointed out that despite the daily-revision system, the government has refrained from passing on cuts in international prices to consumers, instead upping duties during such falls.
However, the slightest hike has been immediately passed on.
Excise duty was raised nine times during November'14-January'16, when international prices slid, but it was cut just once, by Rs. 2, in October'17.
Solution
Bringing fuels under GST will keep prices in check: Experts
There is widespread demand for bringing fuel prices under GST, which will remove taxes like excise duty and VAT.
Even at the highest slab of 28% on base price (Rs. 38 for petrol and Rs. 35.59 for diesel), it would keep prices below Rs. 50.
However, it would mean a tremendous revenue loss for both the Center and states. Discussions on this issue continue.