For consumers, the subsidy cushion that successive governments had maintained to mute the impact of higher fuel costs has been thinned out now
Auto fuel and cooking gas
prices have zoomed in the first fortnight of February, touching record high levels across the country. The price of petrol
rose from Rs 86.30 a litre on February 1 to Rs 88.99 a litre on Monday (February 15) in Delhi. Diesel prices have risen from Rs 76.48 a litre to 79.35 a litre during the same period in the national capital.
Reports have come of premium petrol
being sold at above Rs 100 in Madhya Pradesh’s Bhopal, Maharashtra’s Parbhani, and three districts in Rajasthan. Premium grade petrol
is costlier because of its ability to improve the vehicle’s performance.
While petrol and diesel prices are revised everyday by oil marketing companies and consumers were somewhat prepared for the hikes, the sudden increase in Liquefied Petroleum Gas (LPG or cooking gas) has caught many off guard.
The price of domestic (14.2 kg) LPG cylinders was first hiked by Rs 25 a cylinder on February 1 and again on February 14/15 midnight by Rs 50 a cylinder. These successive and unexpected hikes (LPG prices are usually revised monthly) drove up the price to Rs 769.00 a cylinder in the national capital. These hikes are being attributed to changes in the global market with expectations of squeezed crude oil supplies as producing countries resort to output cuts.
There are also fears of fresh tensions in West Asia as the conflict in Yemen intensifies. For India, this translates to higher expenses on account of imports and is reflected in the Indian basket of crude oil, the average price at which Indian refineries have bought crude oil they processed. The Indian basket of crude is almost three times the average April 2020 levels of $19.90 per barrel, closing January 2021 at $ 54.79 per barrel.
More expensive auto fuels have a spill-over effect on the economy with truck rentals being hiked. “The higher price of crude oil has driven up tyre and fuel costs for truckers. Diesel and tyre comprise 90 per cent of the variable operating cost for a trucker. In January 2021, there was a 6-8 per cent hike in truck rentals (compared with December 2020), primarily because of higher diesel costs, tyres, and other inputs. In the first fortnight of February, freight cost hikes should have been just 2-2.5 per cent across different trunk routes, but it has actually gone up 4-4.5 per cent,” said S P Singh, senior fellow and coordinator at Indian Foundation of Transport Research and Training. The tyre prices are impacted since some raw materials (other than natural rubber) are sourced from crude oil.
For consumers, the subsidy cushion that successive governments had maintained to mute the impact of higher fuel costs has been thinned out now.
Officially, the government has stopped publishing the amount of subsidy a consumer can expect when booking a domestic LPG cylinder. Even in response to a question in the Rajya Sabha, Union Petroleum Minister Dharmendra Pradhan did not share the numbers about the quantum of subsidy consumers get.
Pradhan said: “The prices of petroleum products, including LPG, in the country are linked to the costs of respective products in the international market. However, the government continues to modulate the effective price to consumer for subsidised domestic LPG and the consumers get the products at subsidised rate. The subsidy on domestic LPG increase/decrease with the increase/decrease in the product price in international market and decision of government on subsidy”.
Kerosene, fourth “sensitive” petroleum product, does not have any subsidy with the Centre not giving any subsidised kerosene to those who have LPG connections. This has meant consumers are mostly out of kerosene subsidy net now after the Ujjwala programme. Besides, a small increase in retail price has ended the gap between subsidised and market priced kerosene.
The Union budget has not provided anything for the kerosene subsidy in 2021-22 against Rs 2,677.32 crore estimated this year, down from Rs 4,058 crore in 2019-2020.
For 2021-2022, the Centre has parked Rs 12,995 crore as LPG subsidy, pruning it to less than half of what it had budgeted for in 2020-2021. This is on the expectations of crude oil prices remaining contained between $60-65 a barrel and the LPG subsidy being maintained at lower levels, shifting more burden on consumers.
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