Tuesday, Feb 23, 2021 07:45 [IST]
Last Update: Tuesday, Feb 23, 2021 02:06 [IST]
The woes of the middle class continued to persist as petrol and diesel prices across the country go through the roof. In just a week, oil prices have skyrocketed, going up approximately by a quarter. This week they even crossed the psychological barrier of Rs 100 per litre in some cities.
On top of it, the sudden increase in the price of LPG cylinders has come as a blow to residents whose family budget has gone for a toss. Even as expenses shot up and saving avenues close, middle class incomes have been badly hit by policies such as India’s harsh Covid-19 lockdown. Survey work by the economic research firm Centre for Monitoring Indian Economy has found that middle class and upper middle class Indians were the worst hit by the lockdown in terms of income growth.
People have not recovered from the crisis caused by the pandemic. The price hike also inflates the prices of essential commodities. Understandably, many have lost their jobs and their situation will worsen if the prices are not regulated.
Given how significant the petrol price rise is, Prime Minister Narendra Modi has directly taken on his critics using the much used – and till now fairly efficacious – device of blaming previous governments. Had we focussed on this energy import dependence earlier, our middle class would not be so burdened, the prime minister said on Wednesday last.
There is little fact behind this statement, given that much of the retail price paid for petrol is due to the Modi government’s own excessive taxation. However, in spite of this price increase and attempts to palm off blame, there is hardly any middle class anger even resembling that which existed during the last years of the UPA.
Chairperson of the Congress Party Sonia Gandhi has written to Prime Minister Modi over the rising fuel prices. She urged him to "reduce the fuel prices by partially rolling back excise duty." However, Finance Minister Nirmala Sitharaman called the fuel price hike a "vexatious issue", which required dialogue between the Centre and the states to relieve the consumers. The Finance Minister pointed out that both the Centre and the states had been generating revenue through the retail sale of petrol and diesel. Explaining the reason behind the fuel price hike in India, Union Petroleum Minister Dharmendra Pradhan said that the recent output cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and the outbreak of COVID-19 are the main reasons behind it.
Predictably, even as the petrol and diesel prices touched Rs 100 a litre some states, the State Governments do not appear to be in a mood to reduce VAT on the grounds that the States were short of funds. The hike in fuel prices had helped some States to mop up upto Rs 100 crore additional revenue in the recent months. This is being seen as a big relief to the State which was reeling under severe financial crisis post corona lockdown.
Central and state taxes make up for 60% of the retail selling price of petrol and over 54% of diesel. On the excise duty levied by the Centre on fuel, Sitharaman said there was ‘no guarantee’ that, if the central government forwent its share, the states would not fill the space.
While there has been no relief from the centre, four states have cut prices to help provide some respite to consumers. Following tax cuts in Rajasthan, Meghalaya and Assam, West Bengal became the latest state on February 20 to announce a reduction in VAT by Re 1 on petrol and diesel. Whether other states will follow suit, remains to be seen.
It is essential that the government roll back the fuel price increases so that the middle and salaried classes, farmers and the poor do not suffer more.