Oil : Priced commodity

The bold step by the government in deregulation of petrol prices soon to be followed for diesel show how serious the UPA-2 in reducing the fiscal deficit. This not only improves our Country's credit rating which eventually allows smooth external borrowings to foster our economy but also to minimize the under recoveries of the Oil Marketing Companies(OMC). Based on the recommendations of Kirit pharek Committee which ask for increase of Rs6 per litre of petrol and around Rs100 per domestic gas, Empowered GOM gave a hand shake to this proposal yesterday. Currently the state run OMC are making a loss of around Rs215 crores daily by selling domestic gas and oil products at below market prices in name of subsidies. This led to private companies like Reliance and Royal Shell scale down their operations since 2008 when the international fuel price peaked to $140 per barrel.Over 80% of our domestic oil consumption is met through imports and any fluctuations would have strong ramifications to our energy framework. Keeping this in view, the much awaited Liberation Policy already followed in developed nations, we can choose to fill up our tanks where the price is low as the OMC's would be competitive to grab the market share.

What we have to understand is the real effect of hike in Kerosene by Rs3 per litre. With around 40% of the poor surviving on atleast 4 litres per month, this comes as an additional expense of Rs12 which according to the Oil ministry wouldn't have such a drastic impact as the per capita income of this section has increased since 2008( the last change in kerosene prices were made).Here there is an interesting catch: around 30% of the subsidies were rolled out for the so called 'Rich' and a mere 0.6% was given to the 'Poor' which calls into question the hidden agenda of Govt. Subsidy Program mes. Moving to the majority Middle Class, this further increase of Rs35 on domestic gas and Rs3.5 on litre of petrol would squeeze their savings in the short term. This would not directly fuel the inflation numbers,thanks to the gov. decision to defer the deregulation of diesel prices for now.

As a biker who rides around 1500Km per month, this press notice will make me shell out extra Rs50-70 to fill my tank. In someway i support the Govt to implement strict measures to ensure the energy needs of the country are met and have a long term plan on nuclear and bio reserves.
I just hope there is transparency in the policy implementation and any 1$ change in the overseas market should reflect a change of around 37 paise or less on 1 litre of petrol sold.