FM on Petro Prices: What’s the logic?

Is collecting nearly Rs. 22 lakhs crores to repay just Rs. 2.38 lakhs crore dues justified?


Recently the Finance Minister Nirmala Sitaram issued a long statement in an attempt to defend the indefensible. At the end of the statement, she made it categorically clear that reducing prices of petroleum products is not possible till 2026.

I don’t know whether it is a commitment to reduce prices after that. The key question that comes up from her statement is whether collecting nearly Rs. 22 lakhs crores to repay just Rs. 2.38 lakhs crore dues, is justified?

Let us collate the data presented to the Parliament over the years by the Ministry of Petroleum and Natural Gas, and juxtapose the same with the FM’s assertions.

She presented several fallacious arguments changing the goal post continuously, in tune with the tradition of BJP beginning from depositing Rs. 15 lakhs into bank accounts of each Indian. Her statement is primarily motivated by the fact that the public at large is grudging against the perennial price rise, which is reflected in the latest edition of Mood of The Nation Survey by India Today. But it is motivated by Amit Malviya, head of BJP’s IT cell, the churning house of fake news and also social media postings Hindutva brigade coated with sweat and lemon. I am surprised to know the fact that BJP’s IT cell is more knowledgeable about the public finances than the finance minister.

Way back in 2018, a similar statement was issued by the then minister for petroleum and natural gas, Dharmendra Pradhan, who argued that the constant increase of petro prices is inevitable as the government wants funds to subsidise food security. This contention is also false as the expenditure on account of food security is reduced from Rs. 1,39,419 crores in financial year 2015-16 to Rs. 1,08,688 crores by 2019-20. Moreover, the central government saved a good amount of money from subsidies on petroleum products. The central government subsidy on petrol stood at Rs 85,378 crores in FY 2013-14 whereas it came down to Rs. 24,460 by 2018-19, amounting to a saving of nearly Rs. 60,000 crores. Same as the case with the savings from reduced subsidies on kerosene supplied through the Public Distribution System (PDS) and LPG. Central government subsidies on kerosene supplied through public distribution shops stood at Rs. 31,255 crores in 2013-14 FY whereas it came down to Rs. 6,067 crores in 2018-19 FY. A point-by-point comparison reveals that about Rs. 25,000 crores were saved by cutting subsidies on kerosene. Similarly, an amount of Rs. 30,000 crores saved by cutting down subsidy on LPG. Put together The BJP government over the last six years saved an amount Rs. 1.15 lakh crore by constantly reducing the subsidies on petro products.

Another important reason to continue with price rise is the ‘under recoveries’ argument. An under recovery for a petroleum products marketing company is the gap between final cost of finished product and the actual amount it realised in sales. The decades of 1990s and 2000s when the international oil prices were highly volatile and surging ahead due to America’s war on West Asian countries. As the governments of the day here are little more sensitive to the concerns of the public, they used to refrain from increasing petro prices the way it is happening now. Sensitivity to the public mood or the public concern is the key difference between the previous governments and the current one headed by Modi. This argument was prevalent in the last decade but no one is paying heed to it now. The reason behind this is a reality. The reported under-recoveries in the financial year 2012-13 stood at Rs. 1,61,029 crores and it came down to Rs. 28,249 crores in 2017-18 FY. We could not see any amount mentioned against this head in the latest annual reports of the ministry of petroleum and natural gas. That means over the period, the petroleum companies recovered their dues in full. Thus, an additional amount of Rs. 1.40 lakhs crore has been mobilised through day-to-day price manipulation of petro products. This could only be possible when the constantly increased prices of petro products factors a percent of price towards this end.

As it is well known by now, a whopping Rs. 18.11 lakhs crores were accrued to the central government under Modi’s rule by way of central excise tax, reflecting a 400 percent increase from 2014-15 to 2020-21. This is the only index that shows constant progression apart from stock market indices Approximately another Rs. 12 lakhs crores accrued to the states. Cumulatively the state and central governments made a hole in the people’s purse to the tune of Rs 32.66 lakhs crores of which Rs. 20.66 lakhs crores went directly to the central government! The reason for this, according to the BJP’s IT cell and our beloved finance minister, is to repay the oil bonds raised by the UPA government.

As I mentioned above, the UPA government, due to coalition compulsions, was more sensitive to the public mood and amenable to criticism and people’s struggles. This core aspect of governance is missing from current dispensation. The issuance of oil bonds was also the resultant policy framework adopted by then finance ministers. UPA wanted to reduce the burden of under recoveries to the oil marketing companies while reducing the price burden on the common man. With this dual goal the then central government issued oil bonds. Accordingly, consumers were able to get the petro products at artificially reduced prices. That is a fact which no one can deny. But the UPA government was compelled to do so due to the reasons beyond its control over international oil prices.

There is no such international compulsion on today’s BJP government in terms of international oil price pressures. But despite that it went on constantly increasing the prices. The cost of oil bonds issued by UPA government costs to the exchequer at Rs. 2.38 between 2014 to 2026. If the pace of central excise duties continues till 2026 FY, the accruals to the exchequer would be to the tune somewhere between 40 – 50 lakhs crores. That means, the central government designed a method that enables credit of an amount 200 times higher than it is supposed to pay without any formal policy announcement, concerns to the pitiable conditions on the part of common man or even without any parliamentary oversight. This is the loot that was happening in broad daylight over the last seven years. To justify this broad day loot of hard-earned money from the public, the finance minister roped in a fallacious logic which can’t stand bare minimal scrutiny.

This is where we need to look at recent American experience on deflecting the public attention. The US government spent about Rs. 750 lakhs (Two trillion dollars) on the so-called Afghan war code named Operation Enduring Freedom. The successive governments went away with imposing unbearable burden on the world economy only by flagging up false comparisons, suppressing real facts, popping up artificial and customised arguments so that the public would not question the ground reality. This came to light only when the US appointed a special investigation authority to look into what went wrong in its Afghan operations. What is happening in India at this moment is nothing short of what happened in the US in the case of the Afghan war, wantonly misleading the public attention, structuring artificial reasons, creating fake situations to deceit the people about the original intent of the rulers. From the repeated expositions about the fallacies constructed before the nation, it is on the part of ordinary Indians whether to consume the false arguments or take on those who are constantly deflecting the nation’s attention from real issues.

*The author is a former CWC member of All India Agricultural Workers Union. Views expressed are his own.


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