It will see the re-emergence of private retailers
Even as it has gone for total deregulation of petrol price, the government is not far from entirely linking diesel price to international rates. At current prices of international crude, petrol price has been increased by Rs.3.50 a litre. For diesel the hike is Rs. 2 a litre, which is around Rs.1.50 less than the market-linked price.
Before the revision, oil marketing companies (OMCs) were making under-recoveries of Rs.3.73 a litre on petrol, Rs.3.80 on diesel, Rs.17.92 on kerosene, and Rs.261.90 a cylinder on domestic LPG. Now, there will no be under-recovery on petrol, but the OMCs will still incur a loss of around Rs.1.50 and Rs.15 a litre on sale of diesel and kerosene, and Rs. 227 on a cylinder of LPG.
The Empowered-Group of Ministers on deregulation, headed by Finance Minister Pranab Mukherjee, went ahead with partial implementation of the Kirit Parikh Committee report. The committee favoured an increase of Rs.100 in the price of an LPG cylinder and of Rs. 6 a litre of kerosene.
Periodical revision
Petroleum Minister Murli Deora has said there will be a periodical revision of petrol prices based on the fluctuation in international crude prices, which is likely to happen every fortnight. Similarly, the government is firm on total deregulation of diesel price in phases; therefore periodical revision of diesel price may also be on the cards. However, the subsidy on domestic LPG and kerosene will continue for the time being.
“Even though the government will move slowly in the case of diesel, the essential decision has been taken in principle that the price would be market driven, would be determined by the cost of imports both at the refinery level and at the retail level,” Mr. Kirit Parikh said in an interview.
Excise duty
How would the government tackle the situation arising out of a steep hike in international crude prices that would have a cascading effect on the domestic prices? He said the government had now decided not to touch the excise duties on fuel prices so that it would have a little more flexibility in the future when the prices sent up. Then the Centre's intervention, in the first place, might just be a reduction in the excise duties and it would touch prices a little later if they rose very high.
Private players will re-emerge
Another major impact of deregulation would be the re-emergence of private oil retailers such as Reliance Industries Ltd. and Essar Oil, which went into oblivion a couple of years ago when international crude prices skyrocketed to touch $150 a barrel. While the public sector OMCs got government protection, private players crumbled under price pressure and had to close shop. But now in the decontrolled regime, private companies, including MNCs, will not only enter the market with renewed vigour but also pose stiff competition to the oil PSUs. And here the beneficiary would be consumers.
Keywords: fuel price, petrol, diesel, deregulation, kerosene, LPG, price rise
These oil marketing firms were in existence since long time and their pleas, in olden days, were not heard by the Government. In the name of Oil marketing firm, government wants to help none other than RIL.
The Central government should reduce the tax on petroleum products. But the tax cut can be compensated in alcohol sales. Now the revenue tax of alcohol is around 11.5%. To compensate central government can raise its tax.
Deregulation of oil prices is must. Instead of giving subsidy to all users promote giving subsidies according use in prime fields – agriculture, government -operated transport companies, below poverty line consumers etc.
Increase fuel price is an atrocious act
This was one of the most courageous decisions taken by the government. Yes, it is not a popular decision, but is definitely is a good one in long-term.
Rather than resolving the problem, Congress-led Government is focussing on taking the credit of initiating a bold sterp for long term political milege. Thsi will definitly be followed by counter efforts from the Oppositon by putting pressure to reverse the price hike.
Where will the common man go with vegetable Rs.40.00 a Kg. What measures have government taken to preempt the usual malpractise of hiking prices of all essential goods and commodities and protects common man's interest.
Whay can't our politicians reduce the extravagange. Sonia and Rahul get a security cover of croes of rupees and who are Lalit Modi's children who also have such cover. Are these citizens different from the common man who is exposed to all the Risks including the risk of Survival. What has Mr. Mukherjee to say about this? Where is Democracy. This is Monarchy which will soon lead to Anrachy
Congress seems to be in a hurry to prove themselves outside rather than within the Nation. I am ashamed at the shamelessness of our Politicians.
It is a definite bold step to deregulate the fuel prices and take subsidy component out. If we say are going to ape the free market economies then let's also reduce the heavy excise & sales tax component that is levied heavily on fuel by both the Central and the State governments. Gasoline (Petrol) in a deregulated free market economy like USA costs $2.46 per gallon and this corresponds to Rs 30.15 per litre as per prices in Dallas Area, Texas on June 29th 2010. So why is Petrol in India costing so high ?
We are much closer to the where the liquid gold is mined, so we simply cannot argue that there is a huge transportation overhead for Petrol in India. The exhorbitant tax components should GO away as a deregulated commodity, the Government no longer needs to provide the Subsidy.
At last centre has taken good decision to decontrol the fuel prices. There will be some difficulty in bearing the burden for short term in high inflation days. But in the long run it will be good for nations health and wealth. Govt. can concentrate more on development programmes by decreasing its fiscal deficit.
The "tax payer" concept is something that has not found its worth in India .... because we are not living in the USA where capitalist free market policies exist ... deregulation of oil prices is a much needed reform .... on a common man's scale one is not hit that much by a price rise of Rs 2. A hike in oil prices by linking them to the world market prices will aid India in consolidating its economy in private sectors. PSUs which are making hefty losses will also go up and invite FDI ... thus supporting and strengthening the economy.
Are the ministers charged for these oil prices? Are they charged for the amount of fuel they use? i hope they get it for free. If they are made to pay for these, they can understand the problem of common man. Till then there is no stopping of price hikes on everything. From where do they get money to spend for other political functions? For instance the "World Tamil Conference". From where does the government spend approx 300 crores for this function alone? and where in the world do they spend that money from? is it not out taxes? No one can understand when the country is under high inflation, why the hell do they spend money for these cultural activities? There are many more cash wasted by polititicians for many cultural activities, who has the rights to ask these and to whom?
FARMERS ARE ALREADY IN A HUGE PROBLEM AND THIS INCREASE IN PRICE WOULD ENABLE THEM TO STOP CULTIVATION. THE INCREASE IN PRICE RATE OF PETROL AND DIESEL WILL DETACH THEM WITH THE USE OF VARIOUS EQIPMENT USED IN FARMING.
we must to start in a very big way other means of energy such as wind, sun etc., India has big coastal and we can make so much wind-power and in the deserts sun power, instead of depending only fossil power. Many countries like USA are shifting to renewable power in a big way.
Any sensible government would have tackled the problem of continuous rise in prices of essential goods and services before decontrolling the prices of fuels. Price rise has laid large sections of people low, the most affected being people with low and unsteady income. In the city where this writer lives,that is Bangalore, the minimum bus fare in government owned buses went up yesterday itself by no less than 33% and the next higher increased by 20%. Can economic theory be allowed to trump the survival of your countymen, Dr.Manmohan Singh?
What is happening to partial substitution of petrol with ethanol and diesel with jatropha oil? What is happening to subsidies on electric vehicles?
Without them our economy will surely be ruined and the stock market will surely collapse.
Fuel and energy are perennial problems. To a developing nation like ours it is of great importance. Unless we have our own resources, preferably renewable ones, it will be very difficult to depend on the uncertain supply chain at international level. Thanks to the cultivation of Simarouba glauca, a tree crop with multiple benefits. Simarouba can be grown as an intercrop without affecting the regular crop production and still producing about 60 million tonnes of vegetable oil and 60 million tonnes of bioethanol that too grown in the drylands and wastelands of our nation. The cultivation is easy and implementable even at small and marginal farmers level. By growing Simarouba we can have a perennial solution for the fuel and enegy problems of our nation.
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