Is Mr. Modi Responsible for the Hike in Petroleum Prices?
Introduction
The recent hike in petroleum prices has sparked debates regarding the responsibility of the Indian government. Critics often point the finger at Prime Minister Narendra Modi, questioning his economic policies and their impact on fuel prices. While the Indian government has significantly reduced subsidies on essential commodities like petrol and diesel, the roots of the problem go deeper than just one person or period in office.
The Role of Petrol Marketing Companies
The responsibility for fuel pricing lies with the public sector oil marketing companies, such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL). Unlike the private sector, these companies have a mandate to provide petroleum products at subsidized rates. Once subsidies are removed, the pricing dynamics change, leading to fluctuating fuel prices.
The Impact of Subsidy Removal
Prime Minister Narendra Modi's government removed subsidies on petrol, diesel, and natural gas. By allowing these companies to increase prices on a daily basis, the government aims to directly link fuel prices to international markets. This policy was implemented to make the pricing mechanism more aligned with global trends, but it has led to price hikes that are often criticized as excessive and inflationary.
Historical Context and Economic Trends
To understand the current situation, it is essential to look at historical data. In 2004, when Manmohan Singh was the Prime Minister of India, the price of petrol was only Rs 36 per liter. By January 2024, under Narendra Modi's tenure, the price had increased to Rs 72, representing a significant 100% increase. Similarly, the price of diesel increased from Rs 25 to Rs 55 in 2014, a 120% increase during Manmohan Singh's rule.
Growth in Vehicle Ownership
Another factor contributing to the increase in fuel prices is the rapid growth in vehicle ownership in India. In 2002, the average motor vehicle density in India was 80 vehicles per 1000 people. By 2022, this figure had grown to 240 vehicles per 1000 people. This means that the demand for fuel has more than doubled, leading to increased prices despite changes in government policies.
Economic Failures and Their Impact
Critics argue that the Modi government's economic policies have led to significant inflation, particularly in petroleum products. The Make in India initiative, intended to boost domestic manufacturing, has faced criticism for its implementation. Lockdowns and other economic measures have affected small and medium enterprises (SMEs) and informal sectors, leading to reduced business and investment, which in turn impacts the demand and GDP growth rate.
Government Revenue and Expenditure
As a result of these changes, the government has faced a revenue shortfall, affecting its ability to meet the needs of the public. To bridge the gap, the government has increased taxes, such as the Goods and Services Tax (GST) and excise duties on petroleum products. These increases have indeed hit the middle and lower-income groups hard, contributing to a significant rise in inflation and petroleum prices.
Conclusion
The hike in petroleum prices under the Modi government is a complex issue influenced by multiple factors. While the government's removal of subsidies and realignment of pricing with global markets are key factors, historical trends and the growth in vehicle ownership are also significant contributors. The impact of these policies on the economy and the public is something that needs to be carefully monitored and addressed.