Petrol Pricing in India

Abhinav Gupta

Great article.. Food for thought for solving the current economic scenario..!

The Political Economy of Oil Prices in India at Sanhati

Based on the recommendations of the Kirit Parikh Committee, the Government of India (GOI) on 25 June, 2010 announced the full deregulation of the prices of two crucial petroleum products: petrol and diesel.[1] Henceforth, prices of these two products will be determined by the unfettered play of mark...

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  Siyuan Dai and Vivek Chinchkar like this.
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    Rohit Chaudhary The facts are good, but the assumptions & inferences are silly. 1) Why does the stock market cheer deregulation of fuel prices? Because Reliance, Essar & some imaginary foreign companies will come and capture Indian market!!! Not at all, Reliance & Essar have scaled down their OMC businesses after making huge losses. Even if we assume that some new private company will come in, why would investors invest in the existing companies which don't have any direct relation with the sector & the stock market would go up. The basic, simple and logical reason is that deregulation will improve the fiscal situation in the short term. 2) The article assumes that "Since the private sector wants to enter the oil sector and earn windfalls, it highlights the under recoveries"...One expert committee after another has come to the same conclusion of approaching towards deregulated prices. Does the author suggest that all committees were bought over by the private sector? IMO, the article suggests conspiracy theories when there exist none.
    

    23 hours ago · 
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    Abhinav Gupta This I will agree with that the article has a bias from the first line. Padhte hi samajh aa gaya tha ki woh anti-deregulation hai.
    
    But the fact that under-recoveries have been exaggerated makes
    sense. And when I read this article, what I understood was that the author justified the point of under recoveries being relevant only for private firms, while being more of rhetoric for the state controlled companies. I didn't sniff any conspiracy theory there! I think you are reading too much into that 1 line. The author agrees with you RC..! :)
    

    19 hours ago · 
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    Abhinav Gupta Also, about your first point. Again, I didn't see that in the article. Maybe I read it too fast! And fiscal situation se yaad aya. A friend of mine was talking about how the tax structure on oil can be modified to curb inflation. Govt to khoob paisa kamayegi deregulation se, no doubt. Lekin short term me bhi bhaari padh raha hai basic expenses me.
    Tum batao, tumhe kya lagta hai. Tax zyaada hai kya tel pe? Kam karne se kuch hoga?
    

    19 hours ago · 
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    Rohit Chaudhary Tax to bohat hai but it is a big & clean source of revenues for both centre and state governments. Govt. tax 5-10% kam bhi kar de to itna to international prices ek week me hi change ho jate hai. So that might not have great effect on prices. Waise in the long run it is good to have some taxes on petroleum products to encourage renewable sources, which is in India's interest.
    

    9 hours ago · 
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    Abhinav Gupta Some is a misnomer here, isn't it? And can't taxes here be used as any other corrective measure to stabilize the economy in the short run? 5-10% tax cut nahi zyaada keh rahe hai hum. Deregulate kar diya hai ab to petrol ko. Petrol me under-recoveries ki baat nahi hai ab. To net to govt. ko hi mil raha hai. Chahe tax se ya state operated OMC se. Time to cut these taxes!
    Plus, again, some taxes? :-)
    

    6 hours ago · 
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    Rohit Chaudhary Taxes on petroleum products constitute 20-30% of total tax earnings of states. Isme zyada cut karne ka scope nai hai....states bankrupt ho jayengi :P OMC se dividends central govt. ko hi jayenge, states ko nai. Simple si baat hai....govt. ko itni spending karni hai to kahi se tax karna padega. And petrol pe karne ka faayda hai ki quantity is easy to monitor and little scope for tax evasion + environmentally it is better than taxing other products. I don't think big cut in petrol taxes is possible, ideally I would like small reductions with better utilization of generated taxes.
    

    5 hours ago · 
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    Abhinav Gupta This is the point we got stuck at too. Tax ghatane ke nuksaan bhi kaafi lage.