It is a sad irony that when international oil prices are on a downward spiral, India has administered its biggest increase ever in the domestic price of petrol. Behind this irony lies a story of gross mismanagement of the oil economy by successive governments. The winds of reform that blew across other infrastructure industries such as telecom, transforming them unrecognisably, have largely been absent in the oil industry. The result is a mess characterised by ballooning subsidies, opaque pricing policies and a government that is guided more by political expediency than economic considerations in managing the industry. The reason why Wednesday's price increase of Rs.6.28 per litre — net of taxes, translating into hikes as high as Rs.8.36 in some States — turned out to be so big is that the government, which faced State elections, did not allow oil companies to increase prices in the last six months when global oil markets were on the upswing. By the time the oil companies got the nod, their deficits had spiralled so high that shock therapy became inevitable. We might yet see a partial rollback but the question to ask is: would it not have been less painful if prices had been increased gradually over the past few months rather than in a one-shot massive hike? A regular increase in small doses might also not have elicited the kind of opposition the big raise has now engendered.
That said, we need greater transparency in the pricing methodology adopted by the oil companies who link their domestic fuel prices to those in commodity markets abroad such as in Singapore and Dubai. The concept of “under-recovery,” which is basically the difference between the landed cost of petrol and its domestic selling price, needs to be questioned. India imports crude oil and not petrol or diesel. So why should domestic prices of the two fuels be linked to their international prices? Ideally, the price build-up should be based on the landed cost of crude oil plus the cost of refining and marketing the product. The increase in petrol prices also means the gulf with diesel has widened, further distorting the dynamics of the passenger car industry. By raising petrol prices, the government has only partially addressed the problems of the oil industry. The bigger challenge is dealing with a diesel price increase that has implications for inflation. There is also the issue of paring subsidies on cooking gas and kerosene that are weighing down government finances. Apart from trying to answer the basic question of whether the subsidy on cooking gas, which is by no means a poor man's fuel, is necessary, the government needs to streamline the subsidy delivery mechanism to ensure that only the deserving enjoy it.
Editor Sir,
India spends maximum of its foreign earnings on importing crude oil for meeting its growing energy demand and petroleum products are the largest source of CO2 emission into the environment. India consumes petroleum products worth Rs 4 lakh Crores per annum ! India is the 5th largest emitter of CO2 in the world. We all should do our best to ensure that India emerges as an environmentally responsible super power.
What the Govt. should do ?
1. Govt. should control consumption of petroleum products.
2. Better e- governance of public transport system.
3. Streamline the tax system.
4. Energy efficiency should be improved on top priority.
5. Public transport system should be overhauled.
6. Pool govt. cars and save the environment and the nation.
7. Look for and promote greener and cleaner energy sources -wind, solar, bio energy on top priority.
8. Discourage the production and use of fossil fuel guzzlers.
9. Provide more frequency of buses/trains with a better time table.
10. Govt. / IITs / NITs should spend in R & D on solar powered vehicles.
11. Promote fuel efficiency in each sector of the economy.
12. Make India green and thus great.
13. Carry out energy audit in big buildings to reduce electricity consumption.
India is an oil deficient country. Fossil fuels (Petrol/diesel/ LPG etc.) would be depleted in the coming 20-25 years. India is consuming 3.5 times more oil than it produces. The rest is imported and burned recklessly. Therefore, our roads are clogged with traffic and our air and lungs with smoke. So let us stop fighting in the streets and everyone of us should do our bit to save ourselves and the future generations…
What we can do ?
(1)Use cycle and public transport !
(2)Use bullock carts and bulls in place of tractors in agriculture fields. Over 600 bullock carts ply on Mumbai’s roads for transporting crude oil, kerosene and petrol.
(3)It is necessary that everyone controls consumption of petroleum products.
(4)Pool your car and save the environment and the nation.
(5)School/ college students should commute only by School/ college Buses.
(6)Look for and use greener and cleaner energy sources.
(7)Children should be sent to the neighboring schools.
(8)Do not buy and use the fossil fuel guzzlers.
Why on earth diesel should be subsidized for people driving luxury cars,
the generators powering up corporate houses and the mobile phone towers.
The government blames it on distribution channel, the lack of a
mechanism to check the misuse of the subsidy. Its a shame that no
government could ever put in a mechanism in place to check this malice
and the common man pays a huge price for it.
Petrol is a highly volatile and inflammable liquid fuel that should be handled with care.I mean if there is a big hike in the prices of petrol the market will have dramatic changes.People won't buy new cars nor will
they ride frequently.If petrol grows dearer can diesel be far behind?Ri se in diesel prices,as you have noted in your editorial,would lead to in
flation,that is rise in Wholesale Price Index and money devaluation.The
Government should take care that the situation does not go from bad to
worse.
The Petrol Price hike is wholly uncalled for and unjustified by the
published P/L and B/S figures of public sector oil distribution
Cos.For example HPCL accounts for 2011-12 show a net profit after tax
of Rs.911.43 crores, on an equity capital of Rs.338.63 crores only
Whose money has been invested. It has a Reserves Rs.12783.51 cr.at
whose cost. It has cash earning per share of Rs.77.70 and has declared
dividend per share Rs8.50.This is after accounting for subsidy of
Rs.672.83 cr.If there had been no subsidy there would have been lesser
profit BUT no loss. Why the public - the people should suffer for
giving these public sector cos. more profit in a Welfare State.Their
own accounts show they make huge profit and pay huge DIVIDEND at the
cost of the PUBLIC. This is not a Welfare State pricing policy BUT
naked greed. Centre can not ask States to reduce taxes when it levies
huge taxes, which it does not want to reduce and earns dividend also.
Petrol has become a political agenda after roti, kapda aur makaan. Oil companies hiked petro prices to counter subsidy given by govt on LPG, diesel and kerosene. Its time govt should divide census into LIG, MIG, and HIG. Subsidy given to HIG have a retrospective effect on both MIG and LIG so it should be stopped.
necessities and needs will lead to ideas and inventions.............this price rise will act as a great platform to enable the people to look for greener and cleaner energy sources. will actively control pollution to a great extent.
Instead of giving subsidies to the companies to enable them to sell their commodities at a low price gowernment should introduce a new benefit system which is popular in most of the western countries directly giving the susidy amount to the the poor people. But make sure the wright one getting subsidies. Allow the companies to sell their product at the wright price without any government interference. Why should government giving same treatment to rich and poor? For rich people even Rs.100 for one litre of petrol or Rs.1000 for gas is nothing. They can afford it. But for poor even a small price trouble their monthly budget. These political parties protesting against the hike have no sympathy towards the poor. They are only trying to fish in the troubled waters. Without put forward any solution they are just protesting against the hike and damaging public properties and blocking the traffick causing more trouble to the public. They are eyeing only on vote.
Are our refineries efficient enough? We are being fed with news that
these measures - hiking the petrol price - is to offset the losses made
by oil companies, especially the public sector companies. As it is
happening in other industries, there is an intuition that the public
sector oil companies are no match for the private sector companies in
terms of profit-making capabilities, which is the driving force of
price fixation of petrol prices. People have the right to know the
amount of difference between the cost of production of private sector
and the public sector oil companies.
The politics of oil - be it national or international will go on
forever. The value of the rupee, the politics behind the subsidies
will stay on too - removing the subsidies will be suicidal for any
federal government. These are factors that are "given".
This being said, what does the government do to reduce consumption of
gasoline? Does the government have laws to scrap automobiles that are
not energy efficient? Does the government have plans for rapid and
mass transit? Does the government have plans to discourage the
production of gas guzzlers - especially large sized SUV's?
As citizens can we rise above our pettiness, and do our bit like use
a bicycle, take the bus or train instead of our cars? I think the
answer to all the above questions is a resounding "no".
There are no easy solutions to this issue. The ones we have are the
hard ones, and we are not prepared for that. So why complain?
It was the right decesion of government.Increasing subsidy have create a lot of pressure on Indian economy,even national debt in on it's highest.The top authorities of government are great economist but they are compleately fail to manage it.What more be a better example of government's fiasco.In international market crude oil price is less than $90 per barrel but govt is still increasing oil prices.I think increasing oil prices in not the solution of this conundrum.Government should take stronger steps for FDI and madam Mamta and opposition should support because now it's not the problem of congress government but the problem of nation.So all should come together for a consus.
I believe people are being misled by your article, what is wrong with
the price-rise, anyway if the cost of petrol didn't go up, the loss had
to be payed from tax-payers money. At least, now people will resort to
public transport, precious money from taxes need not be wasted.
I think the govt is taking the right steps to curb fiscal deficit and save the environment. The next step is to streamline the tax & subsidy regime to arrive at favourable prices. Now that we have complained enough that the govt is not passing reforms, well, this is what a reform always looks like, painful.
Whether the prices gradually increased or there was a once time rise in price makes no differnce to most people as the price would be the same right now. Yes i do agree that people should start using public transport and reduce the use of cars. These days in a family of four, one usually sees a minimum of 2 cars and 3 scooters/mopeds. This is definitely not necessary but leading a comfortable life is paramount to the public so for that to stop, public transport will have to undergo a huge overhaul. The public transport system in India is in a very poor state right now. If not the state of public transport it is the people who travel in it and women for that matter do not feel safe at all in public buses/trains. I think the government should concentrate their efforts on giving better transport and more frequency of buses/trains, a better timetable which is also available online so people can plan their time for travel properly.
(1)Considering the bulging oil imports and scarce foreign exchange, it is simply not wise to de-link prices of petroleum products from international crude price. On the contrary, it is necessary to control consumption of petroleum products. (2) Current policy of increasing only the petrol price in fits and starts should be replaced by a rational approach to pricing of all petroleum products. (3) As rightly suggested in the edit it is necessary to adopt transparent policies for deciding prices of all petroleum products and also examine whether ad valorem duties need to be replaced by specific duties and taxes. (4) If the govt. cannot afford to raise prices of diesel, kerosene and LPG for political reasons, to begin with it can certainly impose additional excise duty on diesel driven cars and sports utility vehicles.(5) People should be given information about how the crude price in the international market and value of Rupee are factors to fix the petrol price.
Whenever there is a fuel price hike, everyone chants about using public transport. Why common man has to use public transport while the rich has to use thier luxurious, fuel consuming cars. Politicians, Bureaucrats are enjoying free petrol on a monthly basis and they will be roaming in 10 Cars per person, while common man has to preserve petrol for the politicians and thier sons. When a common man is buying a car and using it he is thinking 100 time about the mileage. does the politician thinks about the mileage while boarding a car. It is unfair to ask the common man to use cycle and Public transport while you are flying and using luxurious cars
In many countries car pooling is must even for Ministers to attend
Parliaments. In India, even our village level people’s representatives
travel with a squad of personnel staff, flamboyant security protocols
etc. in different vehicles one after another! Similarly in many
countries school children, even those belonging to affluent families
having many cars can commute only by School Bus. In Indian cities we
can see each L.K.G student commuting alone in separate cars! Neither
the School nor the parents worried about the traffic jam it
creates.GOI should clamp new guidelines to Govt. Offices applicable to
Officers and elected representatives, Schools and Colleges etc. to
implement austerity measures in using vehicles for commuting. Car
pooling must be made compulsory for Govt. Officers, executives of both
Public and Private sector organizations.
At this time I remember the apprehension ( may be caution?) of U.S
President Obama in end February,2012 when he stated that the growing
demand of petroleum in countries like India, China and Brazil would be
the major reason for increase in oil prices in the long term.
Ironically Obama had revealed then that U.S. consumes more than a
fifth of the world’s oil, though it has only two per cent of the
world’s oil reserves. Let me correlate his speech two years’ back, at
a rally in the city of Buffalo, Minnesota, when he argued in favour of
public transportation system instead of depending on cars for
commutation, saying mass transit system would be good for the
environment. In that occasion too he had declared that in the long-
term if countries like China and India starting to buy cars, the
demand on petroleum and fossil fuels are going to be greater!
We all must accept the fact that the nation really struggles with a
sinking rupee while the fiscal deficit is correspondingly rising. It
is natural that the current hike in petrol price, the country’s
steepest ever had timely amplified resentment from corner to corner in
the political gamut. Public sector oil companies which are shambled
with substantial losses have been really waiting to announce the price
hike after the by-elections. The UPA regime which had just completed
the third anniversary will be in real doldrums if it cannot reduce the
hike in price to some extent if not fully roll-back the same. No
Indian government in future too can afford to stand in favour of
fixing price of petrol into parity with global price, even in extreme
adverse situations when Rupee gets devalued against US Dollar.
One ought not to forget that refinery tax is one of the highest costs in the total
cost of petrol. With the exception of the US and a few other countries that have
access to oil reserves, all other states impose very stiff refinery taxes to (a) raise
money on a regular basis as people always will need fuel, and (b) to supposedly
keep the domestic consumption and hence imports of crude oil in check.
Now, the latter aim has never really been fulfilled well enough as witnessed by the
boom of car ownership in India and China. As for the former, a nation plagued by
such endemic tax evasion and fiscal mismanagement as India can probably not
afford to do away with one of the more reliable sources of funds.
What should we do? Our roads are clogged with traffic and our air and lungs with
smoke. Perhaps, we really should be buying fewer cars - another non-starter.
The refinery taxes need to come down, that's the method which would cause the
least suffering of all!
Its the rich people's Government. The middle class and the lowest
class are requested to suffer. Why cannot subsidies being given to
these classes and the rich being taxed more for the proportionate
increase in their income over the years. What we have to do with the
India's Growth story when we are unable to meet our basic necessities.
India Shining India Rising
But People Suffering People Crying.
Jai Hind
It is true that state governments never allowed to raise the oil prices
concomitant with global oil prices.And now they are blaming union
government for the same. Oil prices has be raised to balance deficit,
otherwise government will be bankrupt.
It is incredible that in a oil deficient country like India people are crazy for cars! On top of it companies like M&M are coming up new models of gas guzzling SUVs! Indian companies do not innovate and spend bare minimum in R&D to improve fuel economy or to come up with alternative fuel powered cars. Indian car companies need to learn a thing or two from their Chinese counterparts like BYD who have come up with electric cars.
As for petrol price hike your editorial made a sensible point that the price should have been raised gradually in small doses as the oil price wend up and this would have been easier for the economy to absorb rather than one large hike. But UPA govt or the real power behind the throne Sonia Gandhi cares little about Indian economy or the Indian oil companies. She is out to preserve the power privileges for her family i.e., her children by resorting to short term expediency. No wonder Indian economy is in such mess and rupee is worst performing currency in Asia.
It is really a big decision both as economical and political as well. global oil prices are decreasing and in India it is increasing b/c of depreciation of rupee vs dollar. It will cause inflation but it will also strengthen GDP growth. but it will impact the pocket of AAM AADMI.this steep increase in petrol price can be divided in step. so that people can bear it. but Govt. is concerned about poor and common man. original petrol prices are approx 44 rs/lt. and rest are the taxes incurred by central and state govt. instead of increasing prices govt can also decrease tax. and can control fiscal deficit by increasing taxes in another sector like corporate taxes.
Is it really a big hike compared to the increase in price of food and
other edible commodity? Take the case of banana for instance. I
remember my bachelor days in 1983-84, when we used to get one dozen
bananas (normal variety) for Rs.2/= (Rupees two only). Now the same
quantity costs me Rs.40/=. That is 20 times. During the same time,
petrol was costing around Rs.5/= in India. With the recent increase
also, the price of petrol is only 16 times its price in 1983.
As rightly pointed out in the editorial, the Government control,
opaque pricing and also the cross subsidy between diesel and petrol
are the real causes of this mess.
Thank you for addressing a question that has always rankled me: to what
extent does the pricing policy obscure the inefficiencies in oil companies?
Basing the price of petrol and diesel on the imported price of crude oil plus the refining cost would not only be more rational but would also allow us to benchmark the refining cost with refineries the world over. This will reveal the inefficiencies and leakages in the operations of the public sector oil companies.
It was the right thing that Govt of India raised the petrol prices in
one shot.In India, we do not have huge oil reserves. We must cut down
the consumption of the petroleum products like petrol,
diesel,LPG,kerosene etc. Also, we can not afford to have so many cars
on the road. We must have a clear cut National Transport Policy,
wherin , we should encourage sound public transport systems, like
Metro Rail, efficient public road transport, good electric suburban
transport etc. Let us all have a look at Singapore. They do not
encourage people to own cars, but have the most efficient public
transport system of rail and bus. Singapore's per capita income is
several times more than that of India.Why to encourage habits and
practises, which we can not afford and sustain in the long run ?
During the Second World War, the famous T.V.S. Bus transport System
introduced a technology of running the buses on Charcoal. Why can't we
improve on such technologies and adopt them to the Indian conditions ?
The increasing burden of cost due to the fuel price hike on the common man is indeed painful. Exorbitant price growth of Rs.7.52 is really an eye opening decisions by the ruling UPA. At this juncture the initiative of opposition & other political parties( protest/ Band/ Rollback) are elementary.
But what I feel that rather than raising our protest, we should understand the root cause. Non renewable energy resources like petrol/diesel/ LPG are limited in nature & it would be depleted in the coming 20-25 years. If we can calculate the global demand supply 20-25 year down the line, then we might land in different equation.
Now time has come we should think together, for searching an alternative solution to this. Govt should invest heavily on R&D to discover something which could provide the perennial source of energy to our future generation. Time has come to increase our dependency on green energy and invest heavily in alternate energy sources like wind, solar, nuclear, & bio energy.
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