In a not so subtle jibe at the ruling BJP government over its failure to rein in skyrocketing fuel prices, Yoga guru Baba Ramdev said he could sell petrol and diesel at as low as Rs 35-40 per litre — less than even half the prevailing market rates, if the government lets him do so.
Asserting that high fuel prices could cost Narendra Modi government elections dearly, Baba Ramdev — once a known BJP supporter — said that he could sell petrol and diesel this cheap if the government gives some tax relief. He also suggested that fuel needs to be brought under the Goods and Services Tax (GST) except for the 28% bracket.
Speaking at NDTV’s youth conclave, Patanjali founder Baba Ramdev said, “If the government lets me, and gives some relief in tax, I can give petrol diesel to India at Rs 35-40 per litre. Fuel needs to brought under GST and not the 28 per cent rate.”
While this can simply be a political statement against rising fuel prices in the country, Ramdev’s claim of selling petrol prices at Rs 35-40 seems unrealistic. For example: Even if both central government and state government taxes are abolished completely, along with dealers’ commission, the petrol price would still be Rs 41.48 a litre in Delhi, higher than what Ramdev claimed.
Moreover, it is impossible for the governments to let go of taxes completely on fuel: First, they are a major source of revenue, second, taxing fuel is also one of the ways to tackle air pollution. Although, there’s no doubt that the tax levied on fuel prices are almost 100% of the base price.
Petrol was sold at about Rs 40 a litre in Delhi in 2009, when fuel was highly subsidised, crude oil prices were within the range of $48-54 a barrel, and the rupee was about 50 vs the US dollar.
The fuel prices could actually be brought to be a really low level only if India becomes less dependent on imported crude oil and more on domestically produced crude. Currently, 80% of India’s total energy demand is fulfilled by imports and so global factors are going to impact the price level of fuel in the country.
Even if the Narendra Modi government completely reverses the excise duty hike since 2014, the relief would be of Rs 10-12 a litre. If states also provide relief of Rs 3 a litre on average, the total relief is going to be Rs 15 a litre, still making petrol price in Delhi Rs 67 a litre.