We are truly a chest-thumping nation. Now they say India is
the third largest economy! That is in terms of purchase power parity, which basically
means comparing countries in terms of how much you have to spend for certain amount
of everyday products in each country. So a dollar in India could be worth 10
dollars in the US.
There is this Big Mac index, which basically compares the
cost of McDonald’s McChicken in different countries, in local currencies, and
decides a country’s PPP by calculating how much McBurgers a country’s gross
domestic product can buy. Strange. And we Indians, at least our media, which
works 24x7 to boost stock market sentiments, get excited by such comparisons. We
won’t allow the sheer number of people we have in the country to come into the
picture.
They say it’s not required because we are comparing
countries’ wealth, not that of people.
If that’s the case, then why PPP? Let’s go by real exchange
rates. Let’s go by one’s affordability anywhere in the world.
And by the way, what if we calculate this PPP on the basis
of the price of petrol?
Indians apparently pay much more for petrol than most
countries in the world, in real currency conversion rates, not PPP, mind you.
Now, I drive a petrol car. When I see a newspaper that
screams petrol prices are up by more than Rs 3 per litre and an advertisement
of Jaguar XF Diesel S, an SUV costing about Rs 50 lakh, next to it, I just lose
it. I’ll never understand why somebody driving a jaguar be offered subsidized
fuel while users of two-wheelers and small cars, who account for most petrol
consumption, pay through their noses.
What the PPPuck!
On the road I start seeing things. All those big SUVs going
by were now laughing at me. They looked down sarcastically at the guy carrying
all his 5-member family on a scooter. The world seems hostile and I feel a
victim of injustice sitting in an air-conditioned car. Beggars and rikshaw pullers
go out of the picture. It’s a world of diesel cars and petrol vehicles.
There were some suggestions of dual pricing for diesel, to
limit subsidies to farmers, commodity transporters and perhaps public transport
vehicles. But the finance minister has denied it and oil marketers have said
it’s difficult to implement and anyway it’s not worth the pain because private
vehicles account for just about 10-15% of total diesel consumption. Fair
enough.
But the problem here is, petrol sales could well be less
than diesel sale to private vehicles. And by artificially keeping diesel prices
much less than petrol, the government is only encouraging people to shift to
diesel vehicles. So petrol consumption falls and diesel sales rise. What’s the
point? Why increase petrol prices so very often? After all petrol accounted for
just about 3% (Rs 5,300 crore out of Rs 121,571 crore losses from oil sales) of
the country’s total oil subsidy.
Also, apparently, it’s not that the government is
subsidizing diesel, or jet fuel, which also by the way costs more than Rs 10 less
than petrol in India, the only country where it happens. Fuel prices are so
high because taxes are so high on them. In the case of petrol about 40% of its
prices are taxes and duties.
So next time we talk about GST, or common tax rates for
goods and services across the country, let’s talk making petrol and diesel, and
perhaps jet fuel too, part of it.
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