Saturday, October 24, 2020
Home Fact-Check Political opportunism on Petrol and Diesel prices: A class act by India’s opposition

Political opportunism on Petrol and Diesel prices: A class act by India’s opposition

Thus, neither the credit nor the blame should be attributed to the government for the change in petrol prices and the fact that we can’t blame the government for this should be seen as a sign towards economic considerations triumphing political considerations.

Petrol Prices have always been at the forefront of the political discourse with politicians throwing around arguments and counter-arguments. Unfortunately, I’ve always believed that prices of such commodities should be driven by pure economics as political involvement in such matters tends to only lead to bigger problems. A case in the act would be to note what the Congress-led UPA-2 did when petrol prices soared under their tenure- they artificially kept the prices lower.

The most important lesson in economics is that there are no free lunches, and thus, as a result of this, when they kept the prices lower, the economy invariably had to pay for this lunch in the form of Oil Bonds, high current account deficits and high fiscal deficits which ultimately led to high inflation, weakening of rupee and above that, a significant slowdown in the growth rate of the economy.

The problem is that they still have not learnt much from their mistakes in keeping the petrol prices artificially low as they continue to blame the government for the increase in the prices as and when it increases. This demonstrates somehow that they continue to look at petrol and diesel prices as a political issue while being completely ignorant of the economic consequences of such an approach.

What is more alarming is to note the hypocrisy of their agenda as when the petrol prices tend to fall, as they have consecutively over the last couple of weeks, they believe it is due to the fall in international crude oil prices. If they blame the Prime Minister for the increase in domestic petroleum prices, then should not they give him the credit for when the prices start falling? After all, when the petrol prices increased due to the rise in international prices then Prime Minister was at fault, now that they’re falling due to a fall in international prices, then Prime Minister must have done something right?

Unfortunately, the politicization of petrol prices serves no purpose towards the larger economic discourse and thus, such analogies are largely redundant as petrol prices have been deregulated to ensure that consumers pay the true price of petrol (I am assuming taxes to be held as constant and within the “true price” as they’re needed for fiscal purposes). This means that the government, especially the central government has little control over when the prices increase (or decrease) because these prices are determined on the basis of movements in the international crude oil prices.

As is the case, it is extremely unfair to blame the Central Government for when prices increase if we won’t credit them for when the domestic prices fall.

The steep dip in oil prices has moderated the domestic prices somewhat but another issue worth understanding is that the Central Government levies a fixed tax on petrol while states levy an ad-valorem (or percentage) tax on petrol and diesel. This means that when prices increase, Central Government gets the same revenue as before, while the State Governments gain more as they tax a percentage on petrol/diesel.

This means that a major share of responsibility to cushion the prices by artificial measures (such as tax rate reductions) if at all required should lie with the state governments rather than the Central Government.

As is the case, the economy suffered due to the reckless spending by the previous government that led to exorbitantly high fiscal deficits and current account deficit that led to a spiralling rupee, high inflation and slow growth or “stagflation”. It is good that the current government has learnt from the economic mismanagement of the previous government and has decided not to follow their irresponsible economic policies driven by clear political considerations.

Thus, neither the credit nor the blame should be attributed to the government for the change in petrol prices and the fact that we can’t blame the government for this should be seen as a sign towards economic considerations triumphing political considerations.

With elections just around the corner, it is refreshing to see a government that is looking at the larger economic interest rather than political gains. This change is the reason why I believe we should give this government due credit while for movements in the petrol prices, all credit and blame must be attributed to the markets!

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

Karan Bhasin
Karan Bhasin is a political economist by training and has diversified research interests in the field of economics. He tweets @karanbhasin95.

Related Articles

Trending now

Faisal Khan says he wants to come out of brother Aamir Khan’s shadow who had earlier called him ‘mentally ill’

Faisal Khan said he will have to break out of his superstar brother's shadow and make his own decisions so that people recognise him as an individual

Exclusive: Conversation that shows how Mumbai Police is trying to coerce witness into naming Republic TV in TRP scam

While Hansa Research report and the FIR filed named India Today in TRP scam, in less than 24 hours, Mumbai Police had seemingly made up its mind that Republic TV was the culprit

Param Bir Singh now wants details of every purchase and expense made by Republic TV, even microphones, toilet papers, makeup and stationery

"This an overt attempt to harass a news organisation, infringe on its operations and bring back the Emergency-era way of functioning," Republic TV stated.

Bihar’s ‘lantern’ era has ended, those who made the state ‘Bimaru’ can not come back to power: PM Modi in Sasaram

PM Narendra Modi addressed his first election rally at Biada Maidan in Sasaram days before Bihar polls.

Legendary cricketer Kapil Dev suffers heart attack, admitted to Delhi hospital

Kapil Dev undergoes angioplasty surgery in Delhi after suffering a heart attack

Did French teacher Samuel Patty, who was beheaded by a migrant Islamist terrorist, attend a rally welcoming refugees to France? Read details

Images from a pro-refugee rally in UK used to claim that French teacher Samuel Patty had welcomed refugees in France

Recently Popular

Exclusive: Conversation that shows how Mumbai Police is trying to coerce witness into naming Republic TV in TRP scam

While Hansa Research report and the FIR filed named India Today in TRP scam, in less than 24 hours, Mumbai Police had seemingly made up its mind that Republic TV was the culprit

‘He supplies drugs and girls’: Estranged wife of Mahesh Bhatt’s nephew Luviena Lodh alleges harassment by nephew-uncle duo

Luviena Lodh said that Mahesh Bhatt is the don of the industry, and he controls everything that goes on in the film industry

France: Charlie Hebdo cartoons projected on government building to express solidarity with deceased teacher who was beheaded by Islamic terrorist

Days after the barbaric beheading of teacher Samuel Paty on the streets of Paris by a terrorist for showing the cartoons of Prophet Mohammad to his students, support continues to pour in for the deceased teacher.

‘Jism ki garmi’: How Hindi film industry disregarded consent and normalised rape and molestation over the years

The Hindi film industry has, knowingly or unknowingly, convinced a generation of people that rape is normal when done in light of 'greater good'.

Lucknow: Jama Mazar caretaker ‘Kale Baba’ caught running sex racket, video goes viral

The caretaker has allegedly confessed to police that he was sexually exploiting women and engaging them in illicit activities in the name of curing infertility and other ailments.

Complaints filed against Eros Now and Arré for vulgar social media posts related to Navratri

Both Eros Now and Arre had published social media posts linking Navratri festival with sex and vulgarity
- Advertisement -

ED summons Punjab CM Captain Amarinder Singh’s son Raninder Singh in FEMA violation case

Amarinder Singh’s son Raninder Singh summoned by ED in relation to a trust named Jacaranda Trust & subsidiaries in British Virgin Islands

Delhi: Already married twice, e-rickshaw driver Dilbar Qureshi poses as Rahul to trap 13-year-old Hindu girl, calls the second wife his sister to deceive...

Dildar Qureshi elopes with minor Hindu girl in Delhi after introducing himself as Rahul, police launches a manhunt

OpIndia exclusive report vindicated: Bombay HC directs India Today to deposit Rs 5 lakh fine imposed by BARC for viewership data malpractice

OpIndia was the first to expose the matter regarding the show-cause notice being sent to India Today by BARC in April this year

‘He supplies drugs and girls’: Estranged wife of Mahesh Bhatt’s nephew Luviena Lodh alleges harassment by nephew-uncle duo

Luviena Lodh said that Mahesh Bhatt is the don of the industry, and he controls everything that goes on in the film industry

Mumbai Police registers FIR against the entire editorial team of Republic TV alleging incitement of disaffection among Mumbai police and defamation

FIR filed against the entire editorial team of the Republic TV for allegedly citing Hansa Research's report on the TRP scam case

Dalit woman gang-raped in Jalore in Rajasthan, victim files case after the accused circulate a video of the act

The victim had reportedly taken her goats for grazing when she was gang-raped by three persons in Jalore in Rajasthan 4 months ago

Tamil Nadu: Chidambaram MP Thol Thirumavalavan says Sanatana Dharma treats women as ‘sex workers’

"Women are basically created as prostitutes by God. All women are prostitutes as per Hindu Dharma, Manu Dharma. All women are prostitutes. This is what the Sanatana Dharma says", said the MP.

139 villages in Gujarat set an example in preventing Coronavirus before the world with not a single positive case recorded so far

The people in these villages have been strictly following the Coronavirus guidelines by wearing masks and following social distancing.

Kashmir: Two terrorists, Abid and Mehraj, surrender before the Indian army after the intervention of parents

When the presence of terrorists was confirmed, security forces called their parents to convince them to surrender

Court extends judicial custody of Delhi riots accused Sharjeel Imam and Umar Khalid till November 20

Sharjeel Imam and Umar Khalid, arrested in n relation to the North-east Delhi riots case, will now remain in Tihar Jail until November 20.

Connect with us

245,563FansLike
467,330FollowersFollow
19,100SubscribersSubscribe