“WE BELIEVE FUEL WILL BE UNDER GST VERY SOON”
With Lok Sabha elections less than a year away and crude oil prices hovering way above India’s comfort zone, minister for petroleum and natural gas Dharmendra Pradhan is in the hot seat. In an exclusive interview with Senior Editor Shweta Punj, he reitera
Q. Is the government thinking of bringing fuel under GST?
In principle, petroleum products should come under GST. GST is paid on petroleum industry input in refinery, exploration. But we don’t get input subsidy because our end-use product is not under the GST mechanism. That’s why, in a way, the industry too takes a hit. For price and tax rationality and fiscal stability of the sector, it is in the industry’s favour if the entire value chain—from production to the marketing network—comes under GST. We are requesting the GST Council to do that. The states were apprehensive initially about bringing petroleum under GST, they were worried about revenues. Seeing the progress in implementation of GST, we believe it will happen very soon. The rate will be decided by the GST Council. It should come to a rational model, that’s my priority.
Q. There is a furore over high fuel prices. What will the government’s strategy be?
Three major factors decide crude oil prices. International crude oil prices are linked to geopolity, fluctuation in the exchange rate as well as the tax structure of respective states and the Centre. For a visible difference (in prices), all three factors need to be complementary. For instance, if international oil prices keep going up and we tweak the taxes, it will not bring any benefits. The government is very sensitive about the spending behaviour of the common man and we did reduce excise duty in October last year; some states even reduced taxes. All states have their own spending pattern and developmental commitments. We have to strike a fine balance among all aspects.
Q. So you are working with the states on reducing taxes and building pressure in the international community?
We are holding discussions with the states and creating geopolitical pressure. We are constantly making the oil-producing nations aware that India is a big market. We are telling the oil producers that we are the number 3 energy consumer in the world. Relatively speaking, our per capita energy consumption is very less, so is the case with the emerging economies. This will go up in the days to come, so the oilpurchasing countries too hold value. That’s why the oil producers can no longer ignore this.
Q. What is the standpoint of oil producers like Saudi Arabia and Russia?
There are signs of Saudi Arabia and Russia revisiting the decision to cut down production. They will take a decision when they meet in Vienna this month. The Saudi oil minister told me personally they will take a decision and are mindful of our concerns.
Q. What’s a comfortable crude oil price for the Indian economy?
For our economy, $55-60 a barrel is a comfortable price. We have said this explicitly in international forums. At the Abu Dhabi investment summit, I said clearly this $70 theory is pinching us.
Q. Will the Centre reduce excise duty?
Crude prices have been sliding since May 30—by 71 paise for petrol and 51 paise for diesel. This is not an isolated issue that you have done it once so the responsibility is over. We are worried about the common man’s pocket.
Q. But oil prices weren’t reduced when international crude prices were down?
The Congress has been raising the issue. If (former finance minister) P. Chidambaram has integrity, he will tell that in the name of oil bonds, he left a debt of Rs 50,000 crore behind. We have paid off the debt. We want to keep the consumer most comfortable.
Q. The 1 paisa cut in fuel price last month seemed like a mockery.
On June 6, petrol prices were down by 11 paise. Earlier, the cut was 13 paise. On June 1, it was 5 paise. The 1 paise cut shouldn’t have been done. It could have been combined with another cut. I accept it was mistake. But this is dependent on the price mechanism, and this wasn’t the first time there was a 1 paise cut.
Q. When do we see oil prices going down now?
When we cut excise duty the last time, Maharashtra, Madhya Pradesh, Chandigarh, Himachal Pradesh and Gujarat reduced prices. It is the responsibility of states as well. It’s not a BJP-Congress battle. Every state has a different need and paying capacity. In a federal structure, I can only appeal to the states.
Q. On your part, will the government go for an excise cut?
We don’t believe in one-time solutions. Providing holistic, long-term, continuous comfort is our responsibility. The poor and the middle class are more affected by oil prices. We must have responsive and reasonable pricing in crude oil. I say on international forums that your price mechanisms are pinching our economy. And we are an emerging economy.