A dire hunger situation in the country looms large
By Abdul Bari Masoud
It is said public memory is short but not always sweet! In May 2012, when petrol prices were hiked by steepest Rs 7.54 a litre, then Gujarat Chief Minister Narendra Modi had termed the hike in petrol prices as “a prime example of the failure of the Congress-led UPA.” Today, petroleum products in India are the costliest in all of South Asia and eventually prices of all essential commodities are skyrocketing which is leading towards a dire hunger situation in the country.
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But the irony is that now Modi himself is in the saddle but his tenure as Prime Minister has seen in all 900 per cent increase in excise duty on diesel, and a 300 per cent increase in excise duty on petrol. The relentless price hike has become a norm for this government as when this story is being filed petrol and diesel prices witnessed a hike for the fifth consecutive day across the country on Sunday (October 24).
This is leading to a cascading inflationary spiral with the Wholesale Price Index (WPI) rising to an 11-year high. The prices of food articles have risen by nearly 5 per cent in April. Primary commodities saw a rise of 10.16 per cent and manufactured products have risen by 9.01 per cent. By the time these commodities reach the retail markets, consumers are charged much more.
While the price rise is occurring at a time when Indian economy has been witnessing a “deep recession, galloping unemployment, collapsing purchasing power and rising levels of hunger”, India has slipped to 101st position in the Global Hunger Index (GHI) 2021 of 116 countries, from its 2020 position of 94th, and is behind its neighbours. However, it seems the present regime has no sensitivity towards, and no regard for, public opinion and protest against its flagpole which, as a politician described, ‘is to divide, deceive, dupe, distract and delude’.
Even the State Bank of India (SBI), India’s largest state-owned bank, has screamed that consistently high fuel prices have pushed inflation up in the country in the past few months. While calling for an ‘urgent cut in oil prices’, SBI has warned that rising fuel price is having a detrimental effect on India’s financially strained households to the extent that they are cutting back expenditures on essentials such as health and groceries in order to pay for fuel.
Making a scathing comment on this, Ajit Ranade, an economist and senior fellow at the Takshashila Institution, said, “It is an indirect tax on a commodity consumed by both the rich and the poor, so the relative burden on the poor is more because the tax is not calculated based on the income of the buyer; and inflation is, in a way, a kind of [additional] tax on everybody.”
It is to be noted that fuel prices in India do not remain high despite fluctuations in global crude prices, nor do they shift along with exchange rates.
When Modi became PM in [May] 2014, international crude prices were about $110 per barrel but by December that year, prices had fallen by up to 70 per cent yet retail prices of petrol and diesel did not drop.
“So what the government did commensurately was strategically increase the excise for petrol and diesel…and generally the state governments follow the Centre, so the value added tax (VAT) levied by states also went up. Essentially it became a fiscal bonanza for the government,” Ranade said.
This follows a recurring policy put into effect by the government. Central taxes on petrol went up from about Rs 9.48 per litre in April 2014 to Rs 32.9 per litre in May 2020, a nearly 250% increase, as per Ministry of Petroleum and Natural Gas data. Central taxes on diesel also went up from Rs 3.56 per litre to Rs 31.8 per litre over the same period, a nearly 800% increase.
As petroleum products are not included in the Goods and Services Tax (GST) regime, states levy differing VAT rates; some also add cesses, such as for road maintenance, and some also offer rebates. All told, more than half the price consumers pay per litre of fuel goes to tax, of which the lion’s share goes to the central government.
According to FactChecker.in, a dedicated website for fact collecting analysis, in June 2021, for every litre of petrol purchased at an Indian Oil Corporation pump in Delhi, 57% of the payment goes to tax (34% to the central government and 23% to the state government); 39% is for the fuel itself; and 4% is the dealer’s commission. Similarly, for diesel, 51% of payment for every litre is tax (36% for the central government and 15% for the state government); 46% for the fuel; and 3% for the dealer.
While the contribution of taxes on oil and petroleum products to the central government exchequer has grown by nearly 46% in 2020-21, the contribution to the state governments’ exchequer has decreased by 1.7%. Between April 2020 and January 2021, the government collected a record Rs 2.95 lakh crore revenue from fuel taxes.
There were windfall gains for the government [in terms of fuel tax revenues] but nobody knows how exactly these gains were used and what was the split.
SMALLER TRANSPORTERS FACE CLOSURE
Economists say that sustained high fuel prices not only have a devastating impact on the transportation sector, but could strain sectors such as MSMEs and agriculture by way of higher input and operating costs.
Suresh Khosla, secretary of Bombay Goods Transport Association (BGTA), underlines that fuel price hikes are easy money for the government but a slow poison for small transporters.
“We are in a Titanic which is about to sink as the way diesel prices are increasing, most of the small truckers in this country will just vanish,” Khosla says.
According to estimates by BGTA, about 85% of India’s truckers are small scale, meaning they own between 1-10 trucks each.
Talking to Radiance, Kishan Saini of the Delhi Nalagarh Goods Carrier, said that various national and regional transporters’ associations have approached the government to reduce fuel prices but the government has not reversed its policy.
“The media doesn’t listen to us, the government doesn’t listen to us, and the prime minister doesn’t listen to us. Is this [country] a dictatorship?” wonders Saini.
The transport sector provides direct and indirect employment to about 20 million and 120 million Indians, respectively.
Economists say rising fuel price is also another blow to Micro, Small & Medium Enterprises (MSMEs), after it suffered badly due to notebandi, GST and lockdowns.
“Even as the formal sector profits grow, employment and consumer surveys suggest significant overall job losses and decline in wages. This suggests that India’s small businesses, which employ 85% of India’s workforce, are under significant distress,” Observatory Group’s Ananth Narayan wrote in a June research note.
Farmers face higher input costs while the government caps food grain retail prices. Economists say higher fuel prices feed into food inflation, too, and affect farmers’ incomes. Any change in fuel prices would affect the cost of farming and food prices because farmers use diesel to run tractors, harvesters, combines, water pumps and generators, they point out .
Monty Sehgal, spokesperson of the Petrol Pump Dealers Association of Punjab, said “There is demand destruction [we are seeing a trend] where the farmers are buying less fuel.”
Undoubtedly, spiral price rise is hitting every segment of the society. As those depend on commuting, their motor bikes are facing a very dire situation. Speaking with Radiance, office-goer Anil Kumar says it’s making a big hole in my pocket that forced me to cut my fuel consumption. Nadir Ali, a hawker, says “I used to sell fruits on my bike roaming in streets but now it has become a loss-making mode of business.”
“Modi called himself chowkidar, but the oil companies have been making profits and the PM has failed to provide any relief for the people,” says Chhatra Congress State president Yasir Nawaz.
Opposition parties and people are not silent over the mounting assaults on ordinary people’s livelihood by the government. They held protests many times in the past but unfortunately it is not turning into a mass movement. Left parties held a fortnight nationwide protest in June this year against the rising prices of fuel, essential commodities and medicines. Congress and NCP, Samajwadi Party and others also followed the suit but all of them failed to turn it into the most burning issue.
When being inquired about this, Congress spokesperson Prof. Gaurav Vallabh told Radiance that price inflation is a very important and critical issue and in the last 11 months, there is a price hike in cylinder price of Rs one per day.
“We have repeatedly held press conferences everywhere, at every level, at every state level and also did ground protests, there were big protests. We are going to take it forward at a bigger level,” Prof Vallabh added.
The main opposition Congress party’s CWC had in its meeting on October 16 discussed and decided to observe a mass agitation, awareness programme, named ‘Jan Jagran Abhiyan’, across the country on runaway inflation and price rise between November 14-29.
However, a large section of people say political parties have failed to galvanise people on this issue. Holding this view, Welfare Party of India president Dr SQR Ilyas says the situation in the country is very appalling and worsening day by day but opposition parties are failing to mount a forceful assault on the government.
“In the present circumstances it was the duty of opposition parties to come to the rescue of the people but it seems there is no opposition at all. Either they wake up at the time of election or keep silent,” Dr Ilays told Radiance.
“I think they have been blackmailed. They fear IT and CBI raids, and some major parties are facing internal problems and defections. Unfortunately none of the parties is having any ideological or alternative perspective. There is neither internal democracy nor any high command. In such situations I feel the civil society must come forward. That is the only alternative left or let small parties come to gather and fill up the blank,” he added.
It is also worrying that civil society groups and activists are also failing the people. Talking to Radiance, noted activist Shabnam Hashmi said, “The Modi government through its control on media has created a narrative where constantly emotional issues, especially hatred towards Muslims, are projected at national level. Political parties have become paralysed . Civil society has been crushed by filing cases against them or strangulating their funding.”
This scenario will take probably a few decades to change, she said.
In its defence, the government claims that the fuel prices have risen because of increase in international crude prices. While its ministers and the ruling party members try to give weird reasons for the continued rise in prices.
Countering this, the Congress says the Centre has artificially kept the prices high by not lowering the special excise duty imposed when the international crude prices fell. Party spokesperson Dr. Abhishek Manu Singhvi concludes by saying it is the world’s most expensive ‘Sarkar’, and the most arrogant ‘Sarkar’, whose flagpole is to divide, deceive, dupe, distract and delude. Along with these five favourite ‘Ds’, you have practised ‘Hum Do, Humare Do’.