India has never been devoid of factors for which the government or the system could be blamed. Regardless of what the people can or cannot do about certain issues, blaming the authorities is the one thing we never fail to do. And reasonably so most of the times, for there are a lot of things people in power can do but are reluctant to.
The spiralling prices of basic commodities have always been an issue in India, a factor that has caused a threat to livelihoods on grass root levels. Petrol and diesel prices for that matter are the most criticised; owing to the direct control of government in manipulating them. Even though the prices of crude oil are low, common people consume fuel at high rates, causing a discomfort regarding the reliability of the current government at the centre.
However, things are never as simple as they seem. There is a highly valid reason behind why the petroleum prices are still high despite crude oil prices being low, and it has a lot to do with the fact that India imports 80% of fuel that it uses.
India buys nearly 5 lakh barrels of crude oil every day from Iran alone. The amount we owe to them has not been paid for 5 years now, which accounts to a debt of nearly $6.5 billion. Even after sanction was imposed on Iran by the USA and the west, India continued buying crude oil from the country and the loans went on mounting up. What further enhanced the loan was that Iran demanded the loans to be paid in hard cash, according to the current value of Euro. Owing to the inability of the Indian currency to do that, the loans have been piling up for over five years now.
Adding the other government taxes, the crude oil is the one element causing a major difference in the fiscal deficit of India. That is the primary reason why the fuel prices in India have not been reduced even if the international prices have reduced. It is true that the prices are directly proportional to the international prices, but India is not in a position to adhere by those rules. The Modi government is on a clear strategy to first get over the fiscal deficit, and the first instalment, that is 5 thousand crores of the total loans has already been paid to Iran in 2016. In 2016-17, India earned revenue of Rs 66,318 crore and Rs 124,266 crore from petrol and diesel respectively.
This is enabling the country to ensure Iran the complete transaction of borrowed money. However, according to a report on Economic Times, the fiscal deficit of India touched 96% in 2017 posing a serious threat to the economy, owing to which the taxpayers are kept in a temporary state of pressure. The tax over prices of basic commodities combined with customs, excise and import duties are assisting the country to get rid of the fiscal deficit.
However, another matter of concern with regard to the right usage of revenue is that when it comes down to infrastructure development and fiscal deficit, the priority must always be given to the former. A lot of the tax payer’s money goes into infrastructure development such as construction of roads, bridges, schools, hospitals, etc; alongside sustenance of administration, defence and other systems. What remains out of the same can be utilized to relive the country off fiscal deficit and loans.
The problem originated during the UPA rule when petrol was priced at nearly Rs.55 even if the barrels cost around $110 per barrel. Petrol was way cheaper than it was supposed to be, a highly effective propaganda employed by the Congress party. Though taxpayers’ money was exploited by the government in different ways, it was not evident as most common people do not tend to worry about fiscal deficit. It was during the short crisis when the value of rupee fell to sawdust that the UPA government woke up to push a economy a little. However, owing to the stocked up deficit, the Modi government is now left with no alternative but hike the petroleum prices, even if the international prices stand at $50 per barrel. The higher prices are only a price that the country has to pay for the mistakes of the previous government.
There is always more than what meets the eye. It is wise to first verify what the reasons for a specific move is, before we simply start blaming Narendra Modi and his masterstrokes. We’ll have him to thank when India shall be rid of its fiscal deficit.