The Union Government had reduced excise duty on petroleum products in 2018 as Chhattisgarh, Madhya Pradesh, Rajasthan and Mizoram went to polls. In 2019, during the general elections, the Union government again reduced excise duty on petrol and diesel by Rs. 1.5 per litre asking oil companies to bear Re. 1 of the cost. Fuel prices were also frozen just before the five state elections of West Bengal, Tamil Nadu, Assam, Kerala, and Puducherry in March-April 2021.Dr. N.R. Bhanumurthy, vice-chancellor, BR Ambedkar School of Economics University, Bengaluru observes that international prices are changing every minute. The rise in prices is inevitable and will be painful, he observes.The last time prices were hiked was when global crude oil was priced at US $80 per barrel. Pre-UkraineRussia war it shot up to US $100 and on March 8 it was US $130.Dr. Bhanumurthy believes all stakeholders need to take the hit. “There must be a little bit of increase in retail prices, a little bit of reduction in the central duties, a little bit of reduction in state government’s taxes, and we will also need to take a hit on a little bit of growth. It needs to be distributed across the economy. The government may have to take more of a hit than households given that their budgets are already tight,” he says.Rating agency ICRA in its report titled Crude Oil Impact on Indian Macros said it expects India’s current account deficit to widen to 3.2% of GDP in 2022-23 if the crude oil price averaged $130 per barrel, crossing 3% for the first time in a decade.Senior economist and former member of Planning Commission, Dr. M. Govinda Rao notes that the integrity of the Union Budget numbers has come under a threat and the much-hyped increase in capital expenditures may not materialise as much as it was hoped.
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