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My driver’s departure and petrol prices

My driver’s departure and petrol prices
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First Published: Fri, May 13 2011. 12 35 AM IST
Updated: Fri, May 13 2011. 06 03 PM IST
As my driver, Suresh Kumar held the position of the second most important man in my life. There was a certainty to life brought on by the knowledge that Suresh was at the wheel. He knew all the routes, the usual haunts, each person’s idiosyncrasies about AC/music/seating and his integrity was unquestionable. We had a long relationship dating back to five years ago. He had been with the family through birth, marriage and death, supporting us through all key life events like a faithful retainer of a Suraj Barjatya production.
Every year, he demanded a significant increment, and we consented to reward his professionalism and loyalty. Last autumn, when we were planning to relocate to a new area, an hour’s drive away, he said he would like to continue working for us. There were many advantages to his continuance, so we sealed the deal with a loan for him to purchase a second hand bike to commute and petrol cost at actuals. This deal was made in the Diwali of 2010. In January, by the time we shifted and the deal became effective, petrol prices went up.
By March, rumblings of discontent began to be heard in the car. Suresh said unless I paid him more, it would not be sustainable for him to work with us. Since January, he had already been bearing the extra cost because of higher petrol prices, which was not part of the initial calculation that he did last October. From our point of view, he was already getting paid more than the market rate as a premium for high quality, apart from the loan and conveyance reimbursement, (not to mention lots of free gifts). If I kept paying him more to match the rising petrol costs, it would become absurd and disproportionate to the value derived by his continuance. He too saw the point. “Petrol prices are increasing every month. After all how much can you go on giving?” he said ruefully. We had to part ways last month, much to our mutual sadness.
Petrol prices have increased at an alarming rate in the past two decades. It was Rs 8.50 per litre in 1989. Five years later in 1994, it doubled to Rs 16.78. In 2005, there were two hikes and the price of petrol became Rs 43.49 per litre. In June 2010, the government decontrolled price of petrol. Between then and September 2010, tiny imperceptible increments brought the price to Rs 51.83. (That’s when Suresh made his deal with us.) Then in December, there was a hike, taking it up to Rs 53 per litre. In January 2011, when it touched a record high of Rs 58.39 (Delhi rates), the government advised oil companies to stop further price increases, as it would cause huge discontent among a population already reeling under inflation.
But oil-marketing public sector units want to make up for their “under recoveries”, losses incurred due to selling fuel at subsidized rates. These losses are estimated at a staggering Rs 300 crore a day! For example, they sell liquefied petroleum gas at a loss of Rs 340 a cylinder and petrol at a loss of Rs 8.50 a litre. So as I write this, oil-marketing companies are about to announce the Rs 3 hike in petrol that they have been held back from because of assembly elections in five states.
India largely depends on imports for petrol. In the hot deserts of West Asia and North Africa, the political turmoil to overthrow their dictators has increased the prices of crude oil. But nearly half of the cost of a litre of petrol is made up of taxes such as excise duty (Rs 14.35), customs duty at 7.5%, sales tax, value-added tax and other cess. The government has a huge manoeuvrability in this area to reduce the burden for the consumer. They can cut taxes and keep prices stable for the common folk. This might cause some shortfall in tax revenues but come on, we all know there’s no dearth of opportunities to trim state excesses (unnecessary Z grade security, chopper rides, huge delegations visiting foreign countries are some that immediately come to mind). So a little tightening within the system itself should help bridge the fiscal deficit that will come out of cutting tax on fuels.
Needless to say, fuel price hikes have a cascading effect on all commodities. Steel and copper prices have risen since the price hikes of 2010. Cars became costlier as input prices, like that of natural rubber have doubled. Food inflation of course is spiralling away upwards like an uncontrollable genie released from a bottle because rise in oil prices increase the cost of transportation at various stages of production and supply. Apart from food, few of the everyday things directly connected to fuel price rise, which I have been noticing with alarm in the past few months are school bus fees, courier charges (up 30%), fuel surcharge of air tickets because of increase in jet fuel prices, auto and bus fares and, therefore, the rates of domestic help who commute to work.
The happenings in the world crude oil market, the Jasmine revolution, lack of political will, populist economic measures, loss making state-owned companies—all of this have affected the life and choices of Suresh Kumar and me in our little world in a north Indian town. Fuel costs are impacting the way Indians live and learn, travel and spend their leisure hours. Families with two-wheelers, who may have wanted to buy a small car, would postpone the decision. People might choose schools closer home for considerations of commuting cost. Fewer people will be able to go on long drives, without worrying about cost. Lifestyles are affected. Old ways of working are compulsorily changed.
But in a karmic sense, it s a case of what goes around comes around. Man’s profligate consumption of a finite natural resource is slowly coming back to bite us. Petrol is now scarcer, hence costlier but also indispensable. If the price doesn’t fall, then consumption will have to. More people will opt for public transport, which will have great civic and environmental benefits. There will be pressure on the government to better public transport and on the auto industry to make more fuel-efficient vehicles. Perhaps there’s a silver lining even to this dismal story.
Vandana Vasudevan is a graduate from the Indian Institute of Management, Ahmedabad, and writes on mass urban consumer issues. Your comments are welcome at toughcustomer@livemint.com
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First Published: Fri, May 13 2011. 12 35 AM IST