Once upon a time, say some 30 years ago, there were only two car manufacturers in India, each manufacturing only one model of car. Every time, the petrol price would increase, that too by a fraction of rupee, the car sale would drop. And interestingly, the annual car sales between the two were, even in the best year, not more than 30-40 thousands. Today, the dozens of car manufacturers sells around two million cars of all sizes and models. India exports cars. Car industry significantly contributes t0 the trillion dollar economy of the country.
Cars and/or particularly the two wheelers are no more luxury but the necessity. Expenditure on fuel for the vehicles for even many common families is significant.
The last summer session of the parliament ended on Tuesday. Wednesday in afternoon, the oil companies announced the increase in petrol prices by an unprecedented Rs 7.54 per litre effective that midnight, just hours after the celebratory dinner of Manmohan Singh for completing its three years of UPA-II. The gas stations all over the country saw almost a riot with all sorts of vehicle lining up for getting the tanks filled. And the reactions of the car driving public were as usual interesting. Should those who use car park it in the garage and buy a cycle? Some with rural background suggested buying of a horse without knowing its unaffordibility today.
Naturally, the media that night in India was full with the criticism of government and those in government had all the excuses of slowing economy, ballooning fiscal deficits, falling rupee with respect to dollar, and the necessity of overdue reform as the reasons for the rise. None talked about the effect of this price rise of petrol on all the ills of the national economy?
As I have spent my life in car industry, I had many questions in my mind. Why did the people crowd the gas stations? Does one time filling that will save few rupees for this month matter? Will the price rise provide answer to the poor governance of the government that runs by excuses? Is the government policy that keeps taxation on the raw crude oil as well as final product heavy increasing the final price, prudent? Should the government bother so much about the profit of the oil companies? Is it not collecting the money from a class of people and trying to offer it to the vote bank in the name of being inclusive and equitable? Why doesn’t it look into reducing taxes and optimizing the other parameters of the cost? Can it decisively say that there is no scope? I wonder why the price of petrol in many other countries with similar lack of indigenous resource are so less?
The breakup of the final price charged to the customer consists of central government and state taxation-excise duty, education tax, dealer commission, VAT, crude oil custom duty and transportation and storage cost besides the business administrative cost. As estimated, the price of crude is only around 36-40% of the price that the customers pay at the pumps. The government must also look into cutting down the cost.
It is interesting to look into some other effects of the price rise. The auto companies that manufacture primarily diesel vehicles get the advantage of the petrol price rise, as the differential between the fuels has gone to Rs 33 per litre. Knowing the government of the company, many companies are expediting the manufacturing or import plans for diesel engines and other related parts to roll out more diesel models. As estimated and reported, while the pending orders for diesel cars have swelled to about 2 lakh and increasing, the already manufactured petrol vehicles are being offered at heavy discounts up to Rs 75,000.
The price rise of diesel will be coming soon and that will get in to the inflation figure. The government instead of working on other priorities must be busy in finding ways to make it visibly acceptable to the vote banks.
I don’t believe that the opposition parties and their protest matter. Unfortunately, social activists of the country hardly bother about these issues, and aam adami is leaderless.
Interestingly, the global crude prices were at a seven-month low on that Wednesday, hovering at $91 a barrel.
In next few days, the petrol price will be cut by few rupees to provide psychological relief. Price of Diesel and LPG price will also get a raise though not that high. Excise duty on the diesel cars may get enhanced taking the advantage out. What can be a better solution for a government, bankrupt in ideas and will?The government will never touch the kerosene that only creates black money through adulteration mainly at the gas stations.