Page 13 - June2018

oil prices

Crude oil prices have a direct bearing on petrol and diesel rates which have shot up
to highest peak since 2014 hurting Modinomics and giving rise to the clamour to
bring petrol and diesel under GST, writes bharat hiteshi

bout 90 per cent of the refining cost in- by 20 per cent to $105 billion in the 2018-19 financial
volves crude oil alone. The spike in crude year from $88 billion in 2017-18.
prices could cause a major headwind for
A Indian markets and upset the country’s historic facts
macroeconomic balance in the financial year 2019. If we look at the immediate past history we find
By the time we write this report, crude had that in July 2008, when international oil prices had
risen above $76.45 a barrel to its highest level touched an all-time high at $142 per barrel, petrol
since November 2014. This could be due to pro- and diesel were sold in the country at 50.62 per litre
duction cuts led by the Organization of the Pe- and 34.86 per litre, respectively. Currently, the global
troleum Exporting Countries (OPEC), strong de- crude oil prices are comparatively low, at around
mand or the prospect of renewed US sanctions $76.45 per barrel, but fuel rates are at record levels,
on Iran. But the fact remains that petrol and the petrol is 76.57 per litre and diesel 67.82 a li-
diesel price rise could be a major headache for tre. Even after factoring in the massive subsidies of
the present government led by Prime Minister the UPA regime — about 15 per litre on petrol and
Narendra Modi as it was for the earlier UPA govern- 25 per litre on diesel — fuels were relatively cheaper
ment headed by Dr Manmohan Singh. a decade ago.
In its latest Monetary Policy Review, the RBI has Retail prices of petrol and diesel have been see-
cautioned about volatile crude oil prices impact- ing an increase for the past month, pushing them to
ing inflation. “International crude oil prices have record levels despite the international crude price
become volatile in the recent period, with a distinct being nowhere near the level it was four years ago.
hardening bias in the second half of March. This has In Delhi, retail petrol and diesel prices were 77.96
adversely impacted the outlook for crude oil prices,” a litre and 68.97 a litre respectively. Such sharp in-
RBI said adding that there is upside risk to inflation.
It is a historic fact that the present government
gained significantly from post 2014 oil windfall,
which allowed them to raise excise duty on fuel The domestic petrol and
nine times. Now that oil prices are again surging,
the chorus for reducing taxes has grown as clouds diesel prices are at all
of deadly inflation loom large. The present Narendra
Modi government has a fiscal deficit target of 3.2 per time high on account of
cent for the fiscal year 2018-19. The government was
going gaga over the constant fall in crude oil prices rise in crude oil prices in
internationally. Little doubt the government did not
budget the risks of rising crude oil price in the Budg-
et 2018. Naturally, the rising crude oil price, in itself, international market.
is going to have an impact on government’s fiscal
deficit. The crude prices have surged 11.92 per cent so Hike in fuel prices
far this year. An increase in oil prices is likely to put
pressure on fiscal and current account deficits in the inversely leads to rise
year ahead as India imports more than 70 per cent of
its oil requirement. in inflation
The petroleum and natural gas ministry
estimates India’s crude oil import bill may increase

Tehelka / 15 june 2018 11 13 www.Tehelka.com

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