Call their bluff

The Government has finally bitten the bullet & hiked fuel prices. As expected those that enjoy power without responsibility & those that think they have no responsibility are yelling for a roll back. The Government is finally now in a position to call their bluff.

The Government should wait for the agitation against the fuel price hike to reach a crescendo (which I expect it will in another couple of days) and then go ahead and declare diesel & petrol as "declared goods". This would mean that the exorbitant sales tax that state governments charge will be capped at 4%. This should bring down the fuel cost to below what prevailed before the hike.

For example in Hyderabad
Petrol price per litre before hike: Rs 51.1
Petrol price per litre after hike: Rs 56.65
Petrol price per litre if petrol is taxed at 4%: Rs 44.30

This allows the government the leeway to even let the oil companies set the price based on global prices, thus removing a huge headache for the government.

This move would lead to shortfall in the money available to the state governments. but that should not worry the Congress too much. The Congress does not have too many state governments, while those that are shedding crocodile tears on the behalf of the common man have a number of states under their belt. The opposition would find it difficult to protest this move as their wish to protect the common man would have been conceded (It is just that their governments will have to foot the bill instead of the centre!). Also the states having lower money to spend would increase Congress' chance of making a come back in these states.