It is true that the crude oil has shot up by about 18 per cent from USD 45.60 per barrel , taking the pump prices of petrol in Delhi (for instance) to Rs 70.39 per litre from Rs 65.40 three months ago. The increase in the retail prices is far less than hike in crude oil, but then the consumer is not willing to compare the crude prices of USD 45.60 in June versus USD 54 per barrel today. He/she would confront you with USD 107 per barrel of crude in May, 2014 and the pump price of Rs 71.51 per litre on June 1, 2014.
With USD 107 per barrel, the retail price of auto fuel was 71.51 per litre, then how come it is about the same when the Indian basket of crude is trading at half that level at 53.83 per barrel, the consumers would ask. If the prices are market determined, the retail prices should have been less than Rs 40 a litre, the ASSOCHAM note has stated.
It said, even though the pricing regime has been linked to market determined rates, a sharp hike in taxes in the form of excise and sales tax or VAT by the Centre and states have distorted the path of reforms.
Consumers cannot be faulted because the reforms cannot be one way. If the exchequer got a windfall on drop in crude prices by additional taxes, the same must be reduced commensurately, the ASSOCHAM Secretary General Mr D S Rawat said.
The chamber said while it is true that the government needs resources for building infrastructure and welfare schemes, over-dependence on petrol and diesel both by the centre and the states would hamper the economic growth.
The impact is already showing on the macro numbers. The inflation on account of petrol and diesel , year on year, in August, 2017 was in excess of 24 per cent and 20 per cent. This would dent the prospects of interest rates softening by the Reserve Bank of India at a time when the industry needs less expensive funds for investment and servicing over-leveraged balance sheets.
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