Former Finance Minister P Chidambaram today slammed the government for hiking petrol and diesel prices, saying the recent 'interval' was only due to the Karnataka elections which got over on Saturday. "There we go again. More taxes on petrol and diesel, more burden on the consumer. The Karnataka election was only an interval," Chidambaram tweeted.
Ending the 19-day freeze on the hike in petrol and diesel prices, the oil marketing companies (OMCs) on Monday increased the petrol price by 17 paise a litre while the diesel price was hiked by 21 paise. The move comes 2 days after polling was conducted for Karnataka elections.
Fuel prices had remained stagnant for the last few weeks. The timing of the spike has raised a storm as political opponents claim that the hiatus in daily revision proved that the Centre forced the "autonomous" public sector oil companies not to revise fuel prices upwards before Karnataka voted. Polling in Karnataka ended on the evening of Saturday and Monday was the first working day after that.
Earlier in December when Gujarat voted, retail prices of Petrol were virtually held static by daily slashing of 1-3 paise for almost 14 days before polls. Right after polling was over from December 14 upward revision of fuel prices started.
While the price of petrol has touched a 56-month high, diesel is at an all-time peak. Petrol price in Delhi was hiked to Rs 74.80 per litre from Rs 74.63 while diesel rates were increased to Rs 66.14 a litre from Rs 65.93.
Though the PSU oil companies often freeze fuel prices before polls, the government has denied having any role to play in this. State-owned oil marketing companies are estimated to have lost about Rs 500 crore as they soaked in the higher input cost due to spike in international oil rates and fall in rupee against the US dollar. OMCs reverting to daily revision in prices could further push up the petrol prices in the wake of rising international crude oil prices and weakening rupee.
Oil PSUs too refused to acknowledge if the freeze followed a government diktat so as to help ruling BJP in Karnataka. Last week, IOC (Indian Oil Corporation) Chairman Sanjiv Singh said the oil PSUs' decision to freeze fuel prices was aimed at stabilising, and that it incidentally coincided with the Karnataka election. He reasoned that the fuel prices saw the daily spike from 25 paise to 35 paise, resulting in the change in fuel prices by Rs 2 or Rs 3 every 15 days. "This was unrealistic. So, we thought of stabilising that, tapering it down to a certain extent. Now incidentally it coincided with some of the state elections. It was not the intention (of oil marketing companies)," he had said.
State-owned oil companies in June last year dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost.
If this practice was followed in letter and spirit, petrol and diesel prices should have been increased by Rs 1.5 a litre in last 19 days, an analyst tracking the sector said.
The government had in June 2010 freed petrol price from its control and the diesel rates were deregulated in October 2014. Prices have since then moved more or less in tandem with international rates barring a few exceptions like the period before a crucial election.
Finance Secretary Hasmukh Adhia and Economic Affairs Secretary Subhash Garg have in the past weeks ruled out any immediate reduction in excise duty to cushion the increases warranted from a spike in international oil price.
The BJP-led government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.
The government had between November 2014 and January 2016 raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 per litre to take away gains arising from plummeting global oil prices. This led to its excise mop up more than doubling to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.
The central government had cut excise duty by Rs 2 per litre in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017, come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre.
However, a global rally in crude prices pushed domestic fuel prices far higher than those levels.
with PTI inputs