Should have been wary of a windfall?

"As a large importer of crude oil, India benefited significantly from lower prices," wrote an editorial in the Mint.  "It helped contain inflation and has a favourable impact on both the fiscal and current account deficits. But a sharp reversal in prices can roll back some of those gains." Current account deficit improved because we had to pay less in dollars for our oil imports but the reduction in fiscal deficit was because the government increased excise duties on petrol and diesel 11 times in 3 years. Excise duty on diesel increased from Rs 3.56 per liter to Rs 17.33 per liter, an increase of 380%, while that on petrol increased from Rs 9.48 per liter to Rs 21.48 per liter. States joined the central government in the feeding frenzy by increasing VAT and sales taxes on fuel. Hapless consumers paid a total of Rs 3.21 trillion in taxes on fuel in 2015-16, to states and the center, and have already paid Rs 2.81 trillion in the first 9 months of 2016-17. The reason why high taxes did not have any effect on retail inflation was because high prices had already been factored in and the government was keeping prices at the same level by increasing taxes, even as crude prices fell. The price of crude climbed to over $100 per barrel in 2014, as this government came to power, and fell sharply in 2016 to below $30 per barrel, allowing the government to rake in windfall gains. The price of oil has risen to around $60 a barrel recently and some predict that it could go as high as $70, but the upside is limited because production of US shale oil will increase as prices rise. According to Nomura, every $10 rise in the price of crude will worsen India's fiscal balance by 0.1% and the current account balance by 0.4% of GDP. As prices rose the government came under severe criticism and, as is usual, chose to bluff its way out of the problem saying that it had no control over international prices. However, elections to several state assemblies were coming up, notably in Gujarat, the Prime Minister's home state, so the government was forced to cut excise duty by Rs 2 on both petrol and diesel in October. The bluff was exposed when it was reported that oil revenue will rise by 13% this year, despite the cut in duty. Maybe because a slightly lower rate of tax on a much higher price amounts to more income. As the international price of crude rose economic growth fell from over 9% in early 2016 to 5.72% in July of this year. If the price rises higher what will the government do? If it passes the cost on to the consumer retail inflation will rise which will make people angry. If it asks oil companies, which are state owned, to reduce prices it will get less dividends from these companies and they will have less money for investing in increasing capacity. And if it reduces taxes the fiscal deficit will rise. Just like people suffer after winning a lottery, the government is also suffering from its greed. Should be wary of a windfall.