Hike in petrol/diesel prices tax-driven, not market-driven: ASSOCHAM

Amid the recent hike in the prices of petrol and diesel being attributed to wavering market price of crude oil, the ASSOCHAM, while dismissing the same, stated that even though the pricing regime is linked to market-determined rates, a sharp hike in taxes in the form of excise and sales tax or VAT by the Centre and the states distorted the path of reforms.

Fearing the three-year high in the prices of these fuels, consumers believe that the concept of market-determined rates was tampered with by frequent tax hikes when the crude oil prices fell steeply and are ruling at exactly half the level of USD 107 per barrel in May 2014, even after rising in the last three months.

"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," said D.S. Rawat, the Secretary General - ASSOCHAM.

Further, the chamber said that 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 ( RBI) at a time when the industry needs less expensive funds for investment and servicing over-leveraged balance sheets," it noted.

An 18 per cent hike in the price of crude oil, from USD 45.60 per barrel has taken 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, the chamber noted.

"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 stated.

The petrol prices were hiked earlier in the week by 7-8 paise per litre and diesel rate increased by 10-11 paise per litre in the four metros as part of the daily revision exercise, as a result of which the fuel rates are at an all-time high since August 2014.

The daily travellers all over the nation criticised the government, while requesting them to reconsider the dynamic surge in pricing.

According to Indian Oil Corporation, effective from 6 a.m. on September 12, customers are shelling out Rs. 70.38 for a litre of petrol in Delhi, Rs. 73.12 in Kolkata, Rs. 79.48 in Mumbai and Rs. 72.95 in Chennai.

Diesel is being retailed at Rs. 58.72 per litre, Rs. 61.37 per litre, Rs. 62.37 per litre and Rs. 61.84 per litre respectively.