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Vol. XXXI No.7, July 16-31, 2021

Adding fuel to fire

by our Special Correspondent

This month, the price of a litre of petrol crossed Rs. 100 while that of diesel touched Rs. 95 in many parts of Tamil Nadu. The hike in fuel prices has been steady and steep – for instance, in January, petrol cost Rs. 88 per litre in Chennai and diesel, Rs. 81. For an economy struggling to make a comeback from covid losses, this has been a further blow.

When asked how autos are plying their trade, Thiruvanmiyur-based auto driver Damodaran replied, “We’re on strike. It’s become impossible to ride – how can we, with fuel prices reaching such highs?” He went on to point out that while autos are mandated to use the metre to calculate passenger fare, there has been no official revision in metre rates to take into account the skyrocketing price of fuel. “Our union staged a protest at Chepauk earlier this month,” he said.

They’re not alone – protests have flared up all across the country against the increase in fuel prices. In Tamil Nadu earlier this month, cadres from the Makkal Needhi Maiam reportedly held a demonstration at Valluvar Kottam demanding that the Union Government take action to roll back taxes that were burdening fuel cost. A media quote from the party representative reads, “We urge the newly-elected DMK-led state government to reduce prices, as promised at the time of the election. We would like to warn that if both the governments do not reduce these prices immediately, the cost of essential commodities will go up and people will suffer further due to the rising cost of transportation.” A delegation from the Tamil Nadu Mahila Congress, led by advocate R. Sudha, went in procession to Raj Bhavan to present a memorandum against the increased rates of petrol, diesel and LPG. The state’s opposition party AIADMK also sought remedy from the State, reminding the newly elected government that a reduction in petrol and diesel prices was a promise in their manifesto.

Fuel being a necessary component for the operation of any service or business, a hike in its cost pushes up the price of transportation and essential commodities as well. Industrialists are worried about the effect it has on the price of raw materials. M.V. Ramesh Babu, the President of Coimbatore District Small Industries Association (CODISSIA), said to the media, “With a large portion of raw materials arriving from such cities as Delhi and Mumbai, transportation cost has gone up with the rise in fuel prices. And we have no option but to increase prices of the finished goods to tide over the crisis.” He is quoted as describing the situation as ‘slow poison’.

For the public, the impact is felt at many points. Vehicle owners inevitably face the first shock of hiked fuel prices, which eat into their budgets. It is surmised that as a consequence, the automotive sector will see a drop in vehicle sales – reports say passenger vehicles and two-wheeler sales already saw a dip in January and numbers are expected to fall further. Even those who use public transport will see increased costs. Additionally, with the transportation industry revising their freight costs, companies engaged in logistics and transportation of goods will increase their service rates. This signals a corresponding increase in prices of almost everything from fruits and vegetables to goods purchased on e-commerce websites. The cost of living is set to rise.

Speaking of the media, the Secretary of Koyambedu Food Grains Wholesale Merchants Association R. Punnaiappan said that public purchasing power has come down drastically. Experts worry that the situation risks a rise in poverty levels – after all, a concerning proportion of the population is already facing job losses or pay cuts, finding themselves unable to pay their children’s school fees; asking them to fork out more than Rs. 100 for a litre of petrol is an additional burden.

The state’s Finance Minister Palanivel Thiagarajan, however, says that an immediate reduction in fuel prices may prove tricky. The fault lies with the Centre, he says, which not only hiked up fuel prices under the heads of cess and surcharge but also did not share such additional revenue with states. Speaking on poll promises, he tweeted, “Things we didn’t know then: 1) Union Budget would switch ~ 50,000 Cr from excise to cess (not shared w/ States) 2) Scale of covid 2nd wave & spending required (1000s of crores) 3) Full extent of fiscal decay. We did not promise immediate cut. We will cut during our term (sic).”

As the leaders in charge work out a solution, the threat of inflation looms large as a public crisis. It remains to be seen how the administrations soften the blow.

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