There’s a pressing need to kickstart the economy and get more revenue
The country needs a new approach on prices, taxes tolls and issues of progress. India must also think about introducing fuel subsidies to boost manufacturing. It could bring in more revenue. A cut in prices is necessary to increase the volume of sales of manufactured goods for additional revenue. Post-poll fuel prices are rising frequently on the plea of rising crude prices. But the companies did not reduce prices when crude prices crashed to virtually zero during the pandemic. The high fuel prices have stoked inflation as transport prices spiral making goods and commodities expensive. The administration says that the petroleum companies decide the prices and strangely, they are frozen at election time. Successive governments in India have been using petroleum as a tax-spinner forgetting that even a paisa hike on petrol has cascading effect on the entire economy. Since UPA times, the economy was dependent on taxes on fuel. Successive administration never corrected it. The problem accelerated as domestic production plummeted to around 20 per cent and dependence on imports increased causing the rupee to slide beyond Rs 76 to the dollar. India’s domestic crude oil production has steadily decreased in recent years. In 2013-14, Indian companies produced 37.8 million tonnes of crude oil and condensate. That dropped to 32.2 million tonnes in 2019-20, a sharp slide of 15 per cent. India produced 35.68 MTs of crude petroleum in 2017-18. It has led to an overall price spiral. Wholesale and retail prices are going through the roof. Sunflower oil jumps by 20 per cent to Rs 182, soya oil sells at Rs 162, dearer by 10 per cent, and palm oil Rs 151.80, dearer by 13.65 per cent. Mustard oil, wheat, rice, pulses rise by over two per cent. Textiles and other commodities are also becoming dearer. Alternate fuels like ethanol, processed largely from sugarcane, are being proposed for mixing with petrol. It is likely to make sugar expensive. It is a myth that it would sell cheap. The processing cost is high. Ethanol production can, according to US studies, cause air, water pollution, soil erosion and habitat loss. It is being seen to benefit Maharashtra cane growers.
The Electricity (Amendment) Bill 2021 on which battery recharging is to be based would make coal and power dearer. More use of batteries will lead to higher coal-generated power production causing heavy emission pollution and spike power rates. During the last over 15 years it was noticed that as petrol prices rise, the economy gets into a spin. Under World Bank and IMF pressure India gave up subsidies causing immense harm to the poor, middle and small enterprises, prices of commodities. A little subsidy, not direct benefit, helps every section of the society. Overall, subsidies benefit a larger population and helps the economy keep prices under check. India needs to understand the Lankan stress on infra that drained its resources. India must go slow on infra now. Infrastructure builds expensive assets with a higher recurring expenditure that stresses the economy severely. Had it conserved its reserves, put off expensive infrastructure projects, Lanka could have avoided getting into the amiss. Increased money supply, infra investments and depreciation of the rupee stoked inflation there.The symptoms of Lankan and Indian economy are not different except that India has the capacity and size to sustain which Lanka does not have. It would be prudent if India reintroduces subsidies on petrol as alternate energy is yet not available. It would change the dynamics of the economy and generate more revenue.
(The writer is a senior journalist. The views expressed are personal.)
