The Great Indian Fuel Hike - common sense takes a backseat

The new government ushered in the month of July 2009 by announcing a fuel hike of Rs 4. per litre of petrol and Rs 2. per litre of diesel. In a sense, the announcement was not completely a surprise. Consecutive governments use fuel price as an effective lever in the political drama by taking advantage of the regulatory mechanism prevalent in the country. It is not uncommon to see a drop in prices in the buildup to the elections during which time the oil companies(most of which are state owned) start accumulating losses. Once the election is over, it is time to pass the buck back to the populace and give a relief to the oil companies. The fluctuating global oil prices have not helped the cause either as India pretty much imports all its oil.

What is surprising however is the reaction by our population to the fuel hike. The most predictable and thereby the most ridiculous reaction is the way, people queue up to the fuel bunks on the eve of the announcement (most times, the fuel hike kicks in only from the following day) and try to fill up their tanks. This silly reaction results in the following

• Huge traffic jams across the board
• The bunks run short of supply very quickly thereby leading to rise in tempers.
• Unneccessary pollution caused due to the traffic jams
• Significant pain to people who really need to fill up their vehicles (because their fuel tanks are empty)
• It is not unusual to see people having heated arguments with the staff at the petrol bunks who reel under the onslaught of the mad rush. In a number of cases, the police had to intervene to bring the situation under control

If you step back and think about this reaction, it makes absolutley no economic sense. For a car, if an average person fills up 20 litres of petrol on a price-hiked day, he stands to gain Rs 80 (which is equivalent to saving up of 1.75 litres of petrol) vis-a-vis filling it up on the next day. If it is diesel, this number goes down to Rs 40 (which is equivalent to 1 litre of diesel). Considering that a litre of petrol gives an average petrol car user a mileage of 12 kms/litre in the city and a diesel car gives a mileage of 15 kms/litre, one is left wondering at what the fuss is all about. It is quite clear that for 4-wheelers, there is just no gain in queueing up on D-day at the bunks. The argument is slightly different for 2-wheelers who do stand to gain slightly more because the average mileage in the city for a 2-wheeler is about 45 kms/litre and thereby makes slightly more economic sense. But if you think about it, a 2-wheeler only runs of petrol and an average 2-wheeler user does not fill up more than 3-4 litres at any point in time, the savings are just about Rs 16 and thereby they really do not save much either. Of course, 2-wheelers are less inclined to cause a traffic jam and also take lesser time to fill up their tanks.

Agreed that this hike could eat into the meagre savings of the middle and lower class who are already reeling under the impacts of the global recession but this mad-rush does not in any way alleviate their pain. As a matter of fact, it just increases their frustration at the eco-system. It is time that we as a population, get mature and stop reacting in such an emotional and senseless manner to the Great Indian Fuel Hike.