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Fuel rates and the abandonment of populism to some degree by the Indian Government, but will this last




Finally, the Government seems to have taken a decision to move away from populism. The Government is drunk on the money that it earns from fuel, since it needs to provide funds for all the social welfare programs that it has launched, so there is no question of a reduction in fuel duty and excise rates. For some time now, since the Government has been in a precarious position politically, it has not had the courage (not only this Government, but the previous version of this Government, as well as the BJP Government that was ruling before that); so the Government would rather eat the extra cost and provide a subsidy in order to avoid increasing the price of fuels. Worldwide, there is a concept that providing a subsidy on fuels really has no appreciable benefit, in fact, the reverse happens. If the price of a fuel rises, and people accept that the Government will indeed increase the cost when the overall price of crude rises, then their behavior will be tempered by that realization.
A profound example of that is in the United States where the fuel prices are linked to the overall price of crude, and when international prices went almost touching $150, people changed their habit, with more car pooling, more usage of public transport, and avoidance of unnecessary trips in their vehicle. It also encouraged a strong movement towards moving towards more fuel efficient vehicles, with the status projecting large gas-guzzle SUV’s no longer being in fashion. Such is the behavior that one would want to see in Indian consumers, and our cities could do with more people trying to become more fuel efficient, going in for discarding those gas guzzlers, and more usage of public transport.
Another problem that the non-passing of such costs were that they were killing the oil marketing companies (and had already killed the concept of private companies being involved in the business of retailing petroleum products such as petrol and diesel since they could not match the subsidies being given by the Government). The amount of losses they had to bear were unsustainable, so if the Government really has the resolve to go through with this decision, then it is a good step. The next step would be for the Government to also take a look at whether the current level of excise and taxes is too high, almost like fleecing the customers.




1 comment to Fuel rates and the abandonment of populism to some degree by the Indian Government, but will this last

  • I agree with your viewpoints.One main thing our public fail to remember is that we import majority of our fuel requirements.We cant keep floating our oil companies by bailing out them with oilbonds forever.Whenever the crued oil price rises,oil companies have to bear the brunt.Goverments have to appease the votebank politics,so they kept subsidizing it.Due to this,there is no real control in vehicular population.Our roads are clogged with vehicles and its a wastage of time.Productivity is affected by heavy traffics.So instead of spending money on oil bonds,government should be able to invest more in infrastructure.But i do feel that so many cesses that government charge on fuels has to be brought down along with the other taxes.That way,the prices can be kept on lower side.

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