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Your petrol pump wala may hold secret to Lok Sabha election win

The previous Congress-led UPA government had lost elections in 2014 when petrol prices had risen sharply in September 2013 to Rs 83.67. This is almost identical to price trend under the current regime when petrol price shot up to an all-time high level of over Rs 90 a liter in Mumbai in September 2018, just a few months ahead of the general election.

Reported by: IANS, New Delhi [ Published on: March 15, 2019 19:04 IST ]
Petrol Price Hike
Image Source : PTI

Petrol Price Hike

It may not be smooth running for the ruling BJP-led NDA government in the coming elections if one measures electoral fortunes of political formations based on public perception built over rising fuel prices.

The previous Congress-led UPA government had lost elections in 2014 when petrol prices had risen sharply in September 2013 to Rs 83.67. This is almost identical to price trend under the current regime when petrol price shot up to an all-time high level of over Rs 90 a liter in Mumbai in September 2018, just a few months ahead of the general election.

What is worse, retail prices of both petrol and diesel have remained high for in the past one month after a period of softening up in December-January. Though state-owned oil companies are restricting price rise by absorbing a portion of the hike, things may become difficult if the current momentum in global oil price is maintained for the next couple of months. 

The benchmark Brent crude prices have remained firm for the last one month rising from about $ 60 a barrel level in early February to over $ 67 a barrel now.

"The coincidence should not be brushed aside by the ruling party looking to win the 2019 elections, again riding on the popularity of Prime Minister Narendra Modi. Public perceptions change quickly and if the current trend of oil prices continues, it would be difficult for the BJP to tone down public anger and get their favor," said a former head of public sector oil marketing company asking not to be named.

As per data from state-owned oil companies, petrol prices rose sharply in the last two years of the UPA government similar to what has been witnessed during the last two years of the NDA government.

In Mumbai, petrol prices reached Rs 78.57 a liter in May 2012 and again reached its peak at Rs 83.62 in September 2013. Though UPA lost in the 2014 elections on various other issues including a wave in favor of BJP candidate Narendra Modi, its inability to control fuel prices played a big role. 

The situation has replayed during the Modi government's tenure as petrol prices have peaked in the last two years of NDA government as well. Highest petrol prices in Mumbai stood at Rs 79.99 (on October 3) in 2017. In 2018, petrol prices broke all records reaching lifetime high level of Rs 91.34 a liter on October 4. 

Though it has moderated to around Rs 78 a liter now, the retail price has been rising for the last one month and if the OPEC production cut sustains, it could rise even further in the coming months.

"The comparison of petrol and diesel prices during UPA and NDA government's tenure should not only be done by taking the retail rates. Prices should also be seen in the light of policies adopted by governments to minimize the impact on consumers. It is here that effort of the NDA government seems lacking," the official said.

The peak petrol rates during the last two years of UPA regime (2013 and 2014) came on the back of prevailing all-time high price level of Indian basket of crude at a staggering $ 107.97 and $ 105.52 a barrel respectively. 

Moreover, during these two years, excise duty on petrol was about Rs 10 a liter while on diesel it stood at Rs 11 a liter. This shows that despite high oil prices, UPA managed the retail rates better through a mix of higher subsidies and lower duty.

Contrast this with oil situation during NDA government's tenure and it becomes clear that the government has remained focused on maintaining its revenue stream through higher excise duty on petrol and diesel. Duty on the two petroleum products was only reduced last October by Rs 1.50 a liter when petrol prices in Mumbai were threatening to breach Rs 100 a liter mark.

In 2017, the highest level of petrol price in Mumbai stood at Rs 79.99 (on October 3), while the average crude oil price of Indian basket stood at an average of mere $56.43 in FY18. In 2018, the petrol price in Mumbai touched Rs 91.34 a liter on October 4 while the average price of crude stood at $80.08 in October.

The NDA government raised excise duty on petrol and diesel on nine occasions between November 2014 and January 2016 increasing its excise collections from mere Rs 99,184 crore in FY 15 to Rs 2,42,691 crore in FY17 and almost similar collections in FY 18. It reduced the duty only twice in October of 2017 and 2018.

UPA / CONGRESS

Year Fuel Price Subsidy / Crude oil price (per barrel)
2012 Rs 78.57 Rs 1,61,029 crore /  $107.97
2013 RS 83.62 Rs 1,43,738 crore /  $105.52

BJP

Year Fuel price Subsidy / Crude oil price (per barrel)
2017 Rs 79.99  Rs 24,460 crore  / $56.43
2018 Rs 91.34 Rs 24,933 crore / $80.08
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