Petroleum prices: Nothing wrong in relief

The reduction in petroleum prices a day earlier than usual announcement was received by many as a populist move in relation to the by-polls in Punjab on Sunday. Populist it may be, but it does not lack rationale. The revenue hungry lot wanted the government to use this opportunity to fill the coffers by levying higher taxes. Recall that the authorities have set a lofty target in lieu of Petroleum Levy to the tune of Rs750 billion.

What people often tend to disregard is that these are no ordinary times. Petroleum prices have increased at an unprecedented rate in less than two months, in an economy that is already showing signs of slowing down. For people with access to English language newspapers or Twitter applications – Rs18.5/ltr reduced on gasoline may not matter a great deal. But for tens of millions of others, every penny counts.

And do not forget the government is still levying Rs10/ltr on account of Petroleum Levy – which is in stark contrast to the subsidy that was in effect not so long ago. So, even a reduction is not essentially a strain on the kitty unlike two months ago. Yes, there is much more that the rules allow the government in terms of imposing taxes, as GST is still not levied and PL’s maximum limit has now been raised from Rs30/ltr to Rs50/ltr.

And for the overly concerned lot, this does not even irk the IMF. The understanding with the IMF is to periodically raise the PL by Rs5/ltr every month, till it reaches the upper limit. Of course, this is not cast in stone, and could be adjusted, should there be more room available in case of a bigger drop in crude oil prices.

The PL target itself is a stuff of dreams, so there is no point losing sleep over the elusive target. The government is well within rights to continue imposing PL in phased manner as agreed with the IMF. And in doing that, if the global crude oil prices offer a relief opportunity, it should not be looked down upon by the more privileged. When the public is expected to pay for global crude oil price change, there should be equal acceptance for whatever relief the prices offer.