The Rs 5 per litre increase in diesel prices announced on Thursday will have a substantial impact on the economy of Madhya Pradesh, especially on the farm sector considering the key role diesel plays in agriculture and related sectors. Diesel pumps are used for irrigation, running threshers and the fuel is used for operating tractors used for ploughing, sowing and transporting the produce.
The hike in diesel prices is likely to set back the state’s attempts at making agriculture a remunerative business. Agriculture had shown a more than 10% growth in the last year and was one of the key sectors that kept MP ahead of other states in the country in terms of growth.
“As per state government claims, MP has clocked 18% growth in the agriculture sector during 2011-12. This is contributed largely to the 11.9 % overall GDP growth claimed by the state in the previous year. More than 70% of the population of MP depends on agriculture,” says Pratap Verma of the Federation of MP Chambers of Commerce and Industry (FMPCCI).
“In a semi-mechanised agriculture operation, diesel is about 20% per cent of the input cost for a farmer. With the prices being increased by 10%, the overall increase in input cost would be 1.6%. Besides this, the prices of DAP fertiliser have also been increased by almost Rs 400 per bag. This has negated the entire benefit that was to come to farmers with the increase in minimum support price of wheat last year,” says Samar Vijai Sinh, an agriculturalist based in Indore.
“An increase in prices of diesel has an effect on the prices of almost everything since diesel is used in transportation. Right from vegetables to school bus fees of children will be impacted,” says economic analyst Rajendra Kothari. He added that the state government will benefit further from this hike as VAT on diesel will increase.
The construction business will also get hit, and the extra cost incurred due to the diesel price hike will be transferred to buyers. “The cost of construction is likely to go up by Rs 1-2 per cubic feet as the transportation cost of inputs like sand, bricks and black metal will go up,” says Ajay Mohgaonkar, state head of the Confederation of Real Rstate Developers Association of India (CREDAI).
Transport operators cry out
Public and road transport operators feel that the hike in the diesel price imposed by the Central government will hit them hard and the common man too, as they will have to shell out more money for any mode of transportation.
President of the Bhopal Transport Association JPS Gill said that the transportation business in MP is already feeling the heat of inflation and the diesel price hike will worsen the situation. “In the present scenario, we would only be able to provide our service if we are paid 15% to 20% for extra on inter-state transportation and 20% to 25% for other states,” said Gill.
President of the Bhopal Nagar Vahan Sewa Owners Samiti Ganesh Singh Baghel told HT: “We will not hike the tariff now, but would appeal the state government to reduce the VAT on fuel, which is highest in MP.”