At last, some relief for the common man on the petrol price front. Will LPG follow suit ?

Lakshmana Venkat Kuchi *

At long last, after many months of steady upward climb in the retail price of petrol and diesel that put additional pressure on the household budgets and had a cascading effect on prices of other goods and services the people received a welcome Diwali gift in the form of excise reduction by the Central Government.

This decision, taken in the interests of the people triggered a similar reduction in VAT from different State Governments bringing down the fuel prices. But, coming close on the heels of an electoral drubbing in Himachal Pradesh, which goes to the polls next year and Chief Minister in that State blaming price rise as one of the issues, the Opposition pounced on the Government and dubbed the reduction in excise duty a panic reaction.

With key elections to five States, including Uttar Pradesh, due in a few months, the Government and BJP leaders are aware that it was an issue that they must give particular attention to. Already, the steep prices of petroleum products and their impact on the common man directly and indirectly through addition to transport costs of goods and services are something that would cost the BJP dear in the ensuing elections.

Congress won the two by-elections in Rajasthan with ease, despite a dip in popularity of Chief Minister Ashok Gehlot, is being attributed to inflation. Actually, Ashok Gehlot went as far as to say that inflation was a Diwali gift to the people in a stinging criticism.

Now, political aspects aside, the impact of petroleum products price rise, although the Government has nothing to do with the price mechanism of oil products, in public perception the Government still has its influence over price determination decisions.

Besides, the vehemence with which the ruling party spokespersons defend the steep price of petroleum products during television debates too has not gone down well with people, who on this count blame the Government.

For the people, though whatever may have prompted the Government decision, the excise duty cut sure has the people heave a sigh of relief, though they would have been happier if the relief was even bigger. Even this excise rate cut is expected to cost the Government in terms of loss in revenue to the tune of Rs 45,000 crore.

Since States charge local sales tax or VAT not just on the base price but also on the excise duty levied by the Centre, the total incidence of price reduction is higher. These States include Assam, Tripura, Manipur, Karnataka, Goa, Uttar Pradesh, Gujarat, Himachal Pradesh, Haryana, Uttarakhand, Bihar, Odisha, and Arunachal Pradesh.

Incidentally, Manipur also goes to the polls next year.

The Rs 5 and Rs 10 cut in Central Excise Duty on petrol and diesel respectively is the highest-ever reduction in excise duty and rolls back a part of the Rs 13 and Rs 16 per litre increase in taxes on the motor fuels effected between March 2020 and May 2020. The Central Government also urged the State Governments to reduce VAT on petroleum products to give relief to the consumers, and most of the State Governments complied.

Incidentally, while most of the Governments run by the BJP followed the cue and announced a reduction in VAT, the Opposition-ruled States are yet to make their stand on this clear. It may be recalled that the Tamil Nadu Government, as one of its first few tasks after DMK came to power, was a unilateral reduction in VAT, making petroleum products cheaper in the State as a succour to the people. But, on the latest request from the Centre, there is yet no decision taken by the TN Government.

Public reaction to the Central Government decision has been welcomed, but the general sentiment is that it was too little and too late. In many States, even after a reduction in excise and VAT, petrol retail price still hovers around 100 or crosses it and it remains a worry for the people. What the people expect is that the Government continues to review, and further reduce taxes so that the man on the ground gets real respite.

After a cut in excise duties on petroleum products, the people are also looking to the Centre for making the LPG cylinders cheaper. Over the past few years, the prices of non-subsidized LPG cylinders have crossed the Rs 1000 mark and this too is one of the reasons for middle-class anger, that the Government now appears to be addressing.

The Opposition clearly has identified price rise and inflation as the key electoral issue, other than unemployment and general slowing down of the economy, and what is more, these are resonating with the people.

It is clear with Opposition parties asking the people to vote out the BJP if they want to bring down the price of petrol drastically. Now, for any ruling party, maintaining price levels and keeping the inflation rates down is essential – as often they have the potential to channelize people’s anger against the Government of the day.

Even when UPA lost power, it may be recalled, inflation was very high and petrol was selling at a high of Rs 75 per litre. This issue was exploited by the BJP, then in Opposition through a very aggressive and impactful campaign that resonated with the people. Of course, there were issues galore, but price rise too added to the overall perception of the people that the Government was inefficient too, and an uncaring one.

The BJP, which has smart election managers and political strategists, is already thinking ahead–of 2022, 2023 and 2024 general elections. Holding price line of essentials, along with targeted social welfare programmes that paid the BJP rich dividends in elections so far since 2014, are the broad contours of the party’s poll preparations.

Opposition leaders, of course, play politics, and dismiss the excise rate cut as too little, too late, and that it was a decision taken out of fear and not one that was taken with the interest of the people in mind. This is more or less the tone and tenor of the attack by the Opposition parties across the country.

In the coming days, politics over petroleum prices and taxes will only further heat up as the heat and dust of elections kick up–with the most crucial of Assembly elections to Uttar Pradesh to be held within a few months.