The recent hike in petro product prices have once again unleashed nationwide protests. The question begging answer is when the Govt is uable to keep tab on rising petro prices then why doesn’t it open petro products to market forces. To be more precise, it should free petroleum products from its control.

Govt control on the highly volatile petro products during the last say over 60 years has led to periodical rise in petro prices and the subsequent protest by opposition parties and people of this country. It has been seen that Govt has rarely hiked prices when international crude oil prices are on the boil. Rather it keeps on waiting for a strategic time with an eye on election. With election now far away the govt felt it an opportunistic time to raise prices putting people in grave crisis as the soaring food inflation has already left gaping holes in their pocket. The time lag in hiking petro prices adds to the burden of the oil companies. Moreover, it also depletes the precious foreign exchange reserves.

The hike seems unjustified especially, when global crude oil prices are on the ebb. It should be realised that today petroleum has become the part and parcel of life. As life is unimaginable without salt, water and air, similarly, life without petroleum can’t be imagined. With lot of activities depending upon this vital item, definitely hike in its prices also affect the whole nation. A plethora of taxes on petro products is barely understandable as it  adds up to its cost. It’s hard to assess the number of taxes imposed by state and the centre on petro products. Wide disparity in petro prices in various states also creates anomaly. It should be known that the percentage of VAT applied in different states are not the same. For instance, prices are quite different in Delhi, Haryana, UP and Rajasthan.

Removing control on petro products would give the same benefit as seen in the Telecommunication sector. Though cost of phone calls both domestic and international has come down drastically, yet the revenue to the centre from this sector has gone up significantly. This has also led to some biggest of the scams involving Rs 1.76 lakh crores. If the centre frees petro products from its control, imposes only service tax and clears the road for entry of private players then it would bring in healthy competition and will automatically help in reducing petro prices. The Govt will also get rid of the unnecessary headache.

Govt telecom companies such as BSNL and MTNL are today performing quite well. The Govt may also keep a few oil companies under its control so that unhindered supplies are assured to defence, railways and other govt establishments.

A simple tax system will also check theft and corruption. In the name of the farming community the Govt provides subsidy on diesel to oil companies. But the point to be noted is whether all the diesel is utilized by farmers only. Today there has been sharp rise in number of luxury cars plying on the road. Moreover, a significant amount is also consumed by generators for power so that the burgeois class can enjoy their ACs even during power cuts! Though kerosene oil is highly subsidized for the benefit of BPL families but a major part of it enters the black market giving black marketeers a free ride right under the nose of govt.

If the govt wants to free the country from the grip of corruption then it will have to remove the double-triple taxation system, subsidy regime, quota and license raj. Its high time, the centre should take earnest step towards removing control on petro products, leaving it on today’s market dynamics.

Rajesh Gupta

Your comments/Reactions are welcome at : rgupta@nnsonline.com