Flammable effect

 Since 2014, the Narendra Modi government has chosen to mostly increase central government taxes on petrol and diesel, quite significantly, and not pass on the benefits of lower global prices to Indian consumers. This can be seen as a strategy to shore up government revenues and free up resources that could be invested in infrastructure development, a point which oil minister Dharmendra Pradhan regularly points out. With rapidly rising fuel prices threatening to turn into a political hot potato, the Modi government has instead blamed it on the previous UPA government as with several other issues. Petrol (regular) prices breached the Rs 100 psychological barrier, a first for India, in Rajasthan and in Madhya Pradesh. Diesel is also retailing at all-time high. States like Assam, Arunachal Pradesh and Meghalaya have significantly slashed prices of fuel and it is expected that other north eastern states would also follow suit. While the Centre continues to hike prices of fuel  almost on a daily basis, these have benefitted states which are sitting on a revenue windfall and have the cushion to follow the Centre’s call on price cuts without impacting their revenue arithmetic, according to economists. It may be pointed out that since 2014, the Narendra Modi government has chosen to mostly increase central government taxes on petrol and diesel, quite significantly, and not pass on the benefits of lower global prices to Indian consumers. This can be seen as a strategy to shore up government revenues and free up resources that could be invested in infrastructure development, a point which oil minister Dharmendra Pradhan regularly points out. This has been particularly clear over the last year, with the price of global crude going topsy-turvy due to the COVID-19 pandemic. Even though the price of India’s crude basket crashed to $19 in April 2020, the price of auto fuels fell on average a little over 6 rupees in the case of both petrol and diesel. While the hikes are seen as being good for the environment, when sales dip; on the other hand, experts, point to the inflationary consequences of such high auto fuel rates and note that it also impacts the agriculture and manufacturing sectors. The union budget offers no tax relief while, a cut in the prices of petrol and diesel could reduce the burden on the middle-class. Oil prices and levels of inflation are often seen as being connected in a cause-and-effect relationship. As oil prices move up, inflation—which is the measure of general price trends throughout the economy—follows in the same direction higher. On the other hand, as the price of oil falls, inflationary pressures start to ease. If the price of oil rises, then it will have a cascading effect on almost all items including transportation costs. The Confederation of Nagaland Chamber of Commerce & Industry (CNCCI), has also shot off a plea on the state government to review hikes in prices of fuel as these have only added to the burden of the common man and in particular transportation and vehicle owners. Hopefully the Nagaland government will look into the demand and take the right step towards mitigating the burden of the people.