Controlling the Fuel Problem, the Government Way

 By: Aditya Rao

It has been interesting to see how the government has been dealing with the surge in fuel prices. India is the World’s sixth largest consumer of fossil fuels. So it has been a surprise to see that fuel prices have still not gone up.

If this had been another year, the government would not even have thought twice to raise fuel prices but this year is crucial. It’s one where elections will take place in 4 states .To top that there will be a general election during the end of the current financial year. But if you thought you’d probably get away paying the same amount for your fuel….think again.

Just to test the water the finance and oil ministries have been sending out feelers to gauge the general mood of the public and its partners. One can perhaps not blame them simply because crude oil prices have been rising throughout the world.Last week saw it closing at an astounding $135 a barrel.

Instead of directly hiking the price of petrol, diesel and other fuels, the government has been trying ardently over the past few months to raise the duty at which the fuel is imported and transported across state borders. The net result is that the government is able to fill its deficit caused by subsidizing fuel through raising money this way. It’s a subtle way of getting the same result but through a different means.

Another avenue the government is trying; is to try and levy a cess .This cess can be given any name such as “oil” cess or “extra tax on income”. The latter term is more direct because it signifies that you will probably have to pay a higher income tax if you fall under the relevant category.

This back door method of gaining funds to match fuel supply does not stop there. The past few days have seen the government push gas companies to raise their security deposits on the gas connections they provide. This means that if you are moving into a new house and apply for a new gas connection, not only will you pay more for the cylinder in time but a lot more than before just to install it in the first place.

There is the other tried method of the government also pushing private companies to push the prices of their cylinders upward. Private companies have done so the past few weeks blaming the need to increase prices on surging steel prices which directly impacts their cost of production.

The reason companies agree to do this is because it is in their best interest to do so. As a ‘reward’ for the trade off the government ensures a smooth supply of fuel to the companies from oil suppliers.

So if in the next few weeks or months you end up paying more on your travel fare, petrol or cooking gas. You might be doing so after having been told that it’s because of the higher amount paid by others for goods other than fuel.

The bottom line however remains that your cash will be used to control the snowballing prices of crude oil.