Ukraine, state taxes and electric vehicles: How BJP is defending sky-high fuel prices

On Sunday, the Central government hiked fuel prices for the 12th time in the last 14 days. The latest hike of 40 paisa has made petrol and diesel expensive by Rs 8.4 per litre in less than two weeks. In Delhi, a litre of petrol now costs Rs 103.8 while in Mumbai it is Rs 118.8. Diesel in Delhi costs Rs 95.1 while in Mumbai it costs Rs 103.1.

The Bharatiya Janata Party and its supporters have attempted to manage the political fallout of this steep rise by offering a host of excuses for why fuel prices are shooting up. These include the Russia-Ukraine war, oil bonds issued by the Congress-led Progressive Alliance government and taxes by states. The government has even promises to speed up the adoption of electric vehicles.

Critics, though, point out that missing from this list has been a factor that makes up the lion’s share of fuel prices in India: Central taxes.

Russia-Ukraine War

Several ministers have cited the Russia-Ukraine war and the international rise in oil prices as the reason for the hikes in India. Speaking in the Lok Sabha on March 24, petroleum minister Hardeep Singh Puri said that fuel has become expensive in the international market. On Tuesday, finance minister Nirmala Sitharaman said that the war had disrupted the oil supply chain and increased prices.

This is important since India imports as much as 85% of its oil requirements.

In response, the Opposition has accused the BJP of manipulating oil prices for elections, increasing them only after polls.

Critics often complain that the Central government only increases and never reduces domestic prices based on international prices. For instance, while international oil prices plummeted during the pandemic, oil prices in India remained the same as the government increased excise.

Price in other states

Several BJP leaders and supporters routinely point to states such as Maharashtra and Rajasthan, which have a high fuel price because of state taxes.

Puri, on March 14, said in Parliament that nine Opposition ruled states had not reduced the value-added tax on fuel after the central government brought down central excise on fuel in November and urged states to reduce their value-added tax.

However, Opposition members claim that it is unfair to ask the states to cut taxes since the Centre has the lion’s share in fuel taxes.

For instance, as of April 1 in Delhi, for one litre of petrol around 63% of the tax was levied by the Centre while the rest was by the state.

Arguing that the Centre should cut taxes, P Thiagarajan, finance minister of Tamil Nadu, told NDTV that since assuming office, the Centre has more than doubled its taxes on fuel, while states have only increased it by 10-30%. For instance, the Centre’s tax on petrol has increased from Rs 9.4 in 2014 to Rs 27.9 in 2022.

Additionally, he said, the Centre can raise revenue through other means like income taxes, which states cannot do.

Oil bonds

Sitharaman cited another reason for the increase in oil prices. She said that the Union government was bearing costs for oil bonds issued by the previous Congress-led government.

Oil bonds were issued to oil-producing companies to incentivise them to sell oil at a lower price. The government would compensate the companies over a period of time, with interest. When the BJP came to power in 2014, around Rs 1.3 lakh crore worth of oil bonds were outstanding. This repayment is what the BJP claims, makes oil expensive even today.

However, several commentators argue that this is a weak justification. For instance, economic commentator Vivek Kaul has written that the amount that is due for the bond payments to date only accounts for around 4% of the excise collected by the Central government from petroleum products.

Government expenditure

Another argument used by the BJP and its supporters is that the high price is justified because the government needs tax money to meet its expenditure.

On Wednesday, yoga guru Ramdev, who had claimed that petrol would be at Rs 40 a litre if the BJP came to power, was asked about the high fuel price. He responded that this was because the government needed money to run the country: “How will they pay the salaries of the army, how will they build roads, how will they build airports?”

He further asked people to work hard in order to combat inflation, claiming he works 18 hours a day.

Similar arguments regarding government expenditure have been used earlier. In October, Puri said that high taxes on fuel was required to fund free meals and cooking gas and Covid-19 vaccines.

Price in other countries

BJP supporters commonly justify domestic fuel prices by pointing out that fuel is more expensive in other countries. This is done by converting the price of a litre to Indian rupees.

On Saturday, a BJP national media panelist tweeted about how petrol is priced at Rs 134 in the United States ($ 1.79). Another journalist pointed out that petrol is priced at Rs 164 per litre in the United Kingdom (GBP 1.64).

However, the Opposition in turn has been pointing to countries where petrol is cheaper. On Thursday, Rahul Gandhi tweeted a list of countries where petrol is cheaper than in India.

However, many of these comparisons are not accurate, as pointed out by some. This is because the income levels and standards of living in countries differ. Therefore, directly converting their currencies to Indian Rupees might not show the true picture.

Push for electric vehicles

The government has also claimed that it is trying to make electric vehicles cheaper in order to tackle the fuel price rise. Union minister of road and transport Nitin Gadkari, who recently came to Parliament in an electric vehicle, promised that within two years, the price of all electric vehicles would be the same as petrol vehicles. “Because of petrol and diesel, we are facing crucial problems. This is the only alternative,” he told Parliament.

Several BJP leaders and their supporters have also made a push for electric vehicles.

On March 9, even NITI Aayog CEO Amitabh Kant tweeted that India needs to move towards electric vehicles given the hike in fuel prices.

Disregard the problem

Another measure employed by the BJP and its supporters is disregarding the problem. One Twitter user who supports the BJP asked people to stop whining about the fuel hike and use public transport and cycles.

This line of reasoning is also seen commonly amongst BJP politicians and their supporters. Last year, amidst high fuel prices, an Uttar Pradesh minister from the BJP claimed that this rise did not affect 95% of the population, while a minister from Madhya Pradesh claimed that incomes were also increasing along with fuel prices.