Understanding the Factors Behind Rising Fuel Prices in Modi’s India
Fuel prices in India have seen a significant rise under the current Modi regime. This increase is attributed to a variety of factors, including taxation, public expenditure, and global economic dynamics.
Fuel Price Calculation
Let’s break down the calculation of the current fuel price. The basic price of crude oil at the pump is Rs 33 per litre. After adding processing, transportation, and profit margins, the price escalates to approximately Rs 60 per litre. Additional taxes, both central and state, add Rs 20 more, resulting in a total price of Rs 80 per litre. However, recent reports suggest that the price has risen to Rs 100 per litre. This significant jump is justified by several factors:
Economic Context and Factors
Industrial Output and GST Collection: Poor industrial output leads to lower GST (Goods and Services Tax) collections. This reduction in revenue is a major challenge for the government.
Public Expenditure: The government has incurred high expenditure on public health, defence, and battling inflation. These expenses are crucial but contribute to a higher fiscal deficit.
Import Bills: With the highest import bill being primarily due to crude oil, there is a constant need to maintain a stable currency. Rising fuel prices help in keeping the exchange rate stable, preventing the rupee from devaluating against the dollar.
Government Policies and Reforms
Government Accountability: The government should come out and address the financial atrocities committed by previous governments. Yesteryear’s government policies have left a negative impact on current reforms. The GDP should remain gas tax-free, and MSP (Minimum Support Price) should be brought under ordinance without court intervention for the national interest.
Non-Polluting Vehicles: Encouraging the use of electric vehicles (EVs) is another strategy to reduce pollution and reduce dependency on fossil fuels. The government aims to shift towards non-polluting vehicles to foster sustainable development.
Tax Structure and Fiscal Issues
Indian law books contain over 50 tax centers and various state governments, contributing to the already high prices. The complexity and number of taxes need to be reviewed seriously to improve economic flows and control inflation.
One of the main reasons for the increase in fuel prices is taxes. Electric tariffs are imposed to encourage the use of domestic goods. This has led to the destruction of many Indian startups post-liberalization in 1990. The Indian economy, while growing, still faces challenges in balancing fiscal health and public expenditure.
Economic Impact on Consumers
The increased fuel price means a significant financial burden on consumers. For instance, if a person uses one litre of petrol per day, the price jump from Rs 72 to Rs 82 per litre translates to an additional Rs 10 per litre. Over a month, this amounts to Rs 300. While this might seem like a substantial amount, it is necessary for the larger interest of the country.
Maintaining a strong economy and ensuring national security sometimes require such sacrifices. However, the government must balance this with public welfare and make sure that the additional expenses are justified in the long run.
In conclusion, the rise in fuel prices in Modi’s India is a complex issue, influenced by global oil prices, domestic taxes, and economic policies. While the increase poses challenges to consumers, it is essential for the long-term stability and growth of the Indian economy.