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Petrol Price Increase : Why blame Congress ??

Recently the prices of Petrol were raised by approx 7.5 Rs by the Government ( or the oil Companies as they claim) and since then they are facing outrage from all and sundry. Be it the allies , the opposition or the Common man , no one has spared the ruling party for their being the sole reason for country's economic problems and woes of the common man.

                                                         Price Chart of Petrol Since 2002

From the depreciating currency to rising fuel prices , rampant corruption to farmer suicides , economic slowdown to rising inflation looks like there is only one alliance to be blamed , the UPA. But Since everyone is singing the same right now , i would try a bit to clear the air on why only one party cannot be blamed for the current scenario.

First to the Fuel part .. let us examine what adds to the price of petrol till it reaches you , the retail. As can be seen a large part of the price is comprises of excise duty and state taxes other than the original cost of final product after imports and refinement. A person who is suffering from rising inflation would blame the government for the price rise , blame them for all that is happening in the world and ask them to at least reduce taxes if there is a problem with international pricing or exchange rate..Simple , isn't it ?? No..

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Imagine the Government as a head of a family who accumulates a handsome amount with small contributions from the members.The family can live happily within its current resources and lifestyle.But the Problem arises when the family expands.More resources are needed and thus more expenses are required to be made.The person will have to spend more to keep the family afloat.The head of the family who solely depends on family members for capital will have to ask for more money to fund the requirements or will have to fund them from the previous savings while trying to save the family from extra burden.

The expenses keep on increasing putting pressure on savings and at one time expenses outgrow the incoming funds from the family.The person therefore under increasing pressure demands increase in contributions from the family to which the members cry foul.They want to avail all the resources and improvements but do not want to pay up.They thus start blaming the head for mismanagement of funds and breach of duty.

The Head is only left with few options .. 

1) Increase the contributions ( taxes ) generally or depending upon the status / facilities a person in the family enjoys.

2) Allow outsiders in the family who pay up for improvements , provide more work to members and also contributes ( taxes ) more..in lieu they get a piece of the development cake.

3) Develop more facilities within the family so that development is independent from outside factors thus reducing the outflow of wealth..Also the contribution (tax) cut would also become a possibility.

The above options may sound easy but when we replace the 'head' with the 'Government' it becomes very very difficult.Here's why..

a) Taxing more : It will involve public outrage and loss of support to the government as not everyone will enjoy shelling out more to the government as the media have made everyone believe that every penny we pay as taxes goes out to the corrupt politicians and bureaucrats and None to the development as promised. A bit here and there is fine but not major changes can be done to the system .

Also Taxing/Pricing Specifically ( as per your income and status ) would require far more infrastructural and manual work than we are ready for right now.Business income slab is one thing and pricing commodities and goods is another.Some people are suggesting pricing petrol and diesel separately for the rich and the poor.But the question arises as to who would identify the individuals on a Petrol Pump ?? Or here also after the introduction of such a policy we would be left with a case where a rich person can easily avail of a BPL and NREGA card in India , while a poor doesn't.

b) Allow FDI  in more sectors not only because they will bring in the resources and technology that our country really needs in times of increasing population and diminishing resources but also because Our government is so much involved in the intricate details of saving its government and promoting the heirs that it does not see the Grains rotting in tons on streets , the age old policies of governments blocking all development work if any. Keeping the PSU Companies alive at taxpayers expense for no apparent reason , running airlines/railways with subsidies cannot go on forever for sure. Reducing redundant spending may help government save more and cut taxes where its important for common man's relief.Populist schemes do not pay anyone other than the Government anyway.

c) Reduce Dependence : India imports 80% of its crude Oil thus making it heavily dependent on external factors like exchange rate and international pricing.Only way is to reduce the dependence on the foreign imports.Unlikely option since you need to have natural resources for that and nothing much can be done about it.Only bit that can be done is to improve the policy procedures promoting the companies that are trying to find the resources for future and improve public transport system facilities so that people can switch to travelling from personal to public transport without having to face major inconvenience.Government cannot afford to cut taxes right now because that would only add to the deficit.With less funds the development would be stalled and we would continue to go into a deeper mess.Government cannot keep on printing money or borrowing more and have to find ways to reduce the deficit.

Current move of the price hike was audacious though necessary at the same time.The Oil companies also have to pay for the crude they import and the government cannot keep adding to the losses.The current economic situation is for everyone is to be seen.The short term measures need to make way for long term improvements.

Yes what we can blame the government for is the policy paralysis , its unwillingness to take tough decisions and also the dependence on coalition compulsions our PM keeps talking about.The Government has lost the support of  the common man as i see but like every country ours had to follow the economic cycle of growth , inflation and Slowdown.It happens more often if you are a dependent and its just that the UPA was caught unaware and unprepared.No wonder we tag them accomplice.


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