The fall in crude oil prices is making the marketing of petroleum products akin to that of any other manufactured consumable in which offering of discounts is a standard tool. It has been reported that some dealers operating Reliance Industries fuel stations are upset that the company is offering a higher discount on diesel sold at company-owned and -operated fuel stations. While this is an internal dispute which the company has to sort out with its dealers, a day may not be far away when state-controlled oil marketing companies will also have to confront the issue of discounts offered by privately owned refiners and marketers. Simultaneously, there are complaints that the government is not passing on to consumers a chunk of the fall in oil prices. It is thus profiting or profiteering at the expense of the consumer and creating an element of inflationary pressure in order to showcase its fiscal management effort. This is despite the fact that diesel and petrol prices have fallen in India largely in tandem with global prices.
As the consumer clamour for lowering oil prices is likely to grow, the government needs to take a firm stand on the matter and lay its cards on the table. Non-renewable fossil fuel prices will have to be kept at a level that discourages consumption and makes them last as long as possible. India imports almost 80 per cent of its annual crude oil requirements. Any pricing policy for petroleum products should therefore keep this factor in mind. In addition, letting up on this front (allowing prices to fall) would raise consumption and emissions and negate the effort to roll back global warming. Keeping prices high would also be in line with the spirit of the Paris climate accord at which nations, after a historic process of consultation, agreed to indicate the extent by which they will limit and set back their generation of greenhouse gases. The adverse impact of the fall in oil prices on the battle to arrest climate change is already evident from the fall in the prices of recyclables like plastics waste. What is urgently needed is to raise the economic incentive for recycling, not the reverse. It will not be popular for the government to willfully desist from passing on the entire benefit of falling crude oil prices, but that is what needs to be done. Once the cushion offered by falling prices is taken away by the government, controversies over discounting should disappear along with the space to do so.
The Union finance minister doubled the renewable energy cess on coal in the last Budget. There is eminent logic for him to explore credible options for raising resources to finance the proposed clean energy fund so that it can give an impetus to the generation of renewable energy with greater vigour.
