THE GIST of Editorial for UPSC Exams : 27 May 2020 (Oil price pickle: On fuel duty hike (Indian Express))

Oil price pickle: On fuel duty hike (Indian Express)

Mains Paper 3:Economy
Prelims level: Not much
Mains level: Deregulation of Oil Prices

Context:

• Union Petroleum Minister Dharmendra Pradhan’s recent remark that the Centre is taking a ‘cautious and conscious approach’ of ensuring a balance in fuel prices and aims to use the resultant savings for welfare is on the face of it unexceptionable.
• With global oil prices still about 45% lower than 2019 closing levels despite coordinated supply cuts by major producers, India had an opportunity to pass on the benefit to consumers and provide a fillipto becalmedconsumption.

Deregulation of Oil Prices:

• That the ‘deregulated’ oil marketing companies chose not to reduce pump prices, even when crude tumbled last month, could be attributed to their caution amid a sharp slumpin demand in the wake of the nationwide lockdown.
• It is the government’s decision, earlier in May, to raise Excise Duty on petrol and diesel for a second time in less than two months that raises several concerns.
• For one, subsequent to the latest increase the Centre’s tax revenue on a litre of petrol sold by IOC in Delhi as on May 16 was 1.8 times the fuel’s freight inclusive base price of ₹18.28 and represented 46% of the final retail price of ₹71.26.
• With economic activity brought to a near standstill by the lockdown the Centre’s overall revenue prospects have come under severe strain, and from that perspective the government’s move to maximise its takings from transport fuels is understandable.
• Still, the fact that the government has consistently tinkeredwith the duty structure through recent years of largely benignoil prices, undermines the benefits from pricing deregulation that ought to have accruedto oil companies and consumers.

No demand for Oil:

• Back in 2018, ahead of key Assembly elections, the Centre had cut the excise duty at a time when global crude prices were on the ascentin order to minimise any electoral fallout from unchecked fuel costs.
• The government’s goal of maximising revenue from fuel ............................................................................................................................

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Conclusion:

• With potential investors unlikely to be impressed by the lack of autonomy in the sector, it is in the government’s interest not to risk the health of the goose that lays the golden eggs.
• The increased duty on fuel can fund welfare, but arbitrary methods will have implications.

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1)With reference to the Jiomart, consider the following statements:
1. It is an online-offline model that combines the strengths of Reliance Jio and Reliance Retail.
2. Facebook and WhatsApp had signed a commercial agreement with Reliance Jio over JioMart.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: ......................................

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Mains Questions:
Q.1)The increased duty on fuel can fund welfare.......................................................