I have heard rumours to the effect that petrol and diesel prices will finally go up by the end of this month. I at The Examined Life would thank all my tax-paying Indian readers for subsidising my diesel for the past few months.
12 thoughts on “Thanks to all my readers”
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Haha. Lucky bum you are.
A German friend once commented that Indians subsidised his fuel costs by Rs. 20,000 + per year. He drove a diesel Mahindra Trax. That 20 K figure was quoted in 1994. So i’m sure it’s much more now.
Nearly everywhere in the world petrol and diesel cosst the same. In India petrol prices are artificially inflated to subsidise diesel (and trucks that supply goods etc). The unintended consequence is that we have a lot of diesel cars like Ravi’s Indigo that also take advantage of the same benefit.
No it will be much less. The subsidy is much less than it was in 1994.
Counting inflation? I doubt if the subsidy level has fallen so low as to cancel out the inflation effect.
Yup, even counting inflation. Diesel and petrol prices in 1997 were 11 and 26 bucks respectively (This from a Congress poster blaming BJP for price rise)
The absolute price difference has fallen from 15 bucks to 9 bucks now. I suspect that it is kerosene that is most subsidised and ATF that is bearing the biggest brunt.
Was that subsidy? I mean, not increasing petrol/diesel prices in the last four months, even when intl crude prices went up.
I read that oil companies lost about Rs 500 crore so far on this. But, I guess, the price hike, whenever it comes, will make good the losses.
By the way, some people including IOC chairman think there is a strong case for bringing back some kind of price stabilisation fund to protect domestic consumers from changing crude prices. Whats your opinion?
Ramnath, the losses can be made good only if the price hike is steeper than the actual crude price rise in the international market. Which means that instead of smoothing out price fluctuations, you’ve exposed the consumer to greater variation in this instance.
Secondly, the idea of price stabilisation is not just that the consumers are protected from price hikes, but also that they are not given the benefit of price reduction. Only then does “price stabilisation” make sense. Otherwise it is a subsidy. You think politicians will allow that?
Thirdly, the assumption behind a price stabilisation fund should be that consumers are protected against short term fluctuations, not long term trends. It is too much to expect that anyone can say whether a price rise is a fluctuation or a trend. Chances are this will only make oil companies conservative about raising prices. Eventually it will end up as a subsidy.
Without going into the detailed reasons, isn’t it ironic that a supposedly Reformist and quasi-Capitalist government did not raise the oil prices for months, and a left-leaning government will do so at once? 🙂
The quasi capitalist government wanted to win the election. They couldnot, and would not, and whatever not, raise fuel prices.
Plus, this is not just a quasi capitalist governemnt’s hypocrisy. Any government, at such a position, (elections approaching, nned to win situation etc) would do the same.
Not that I am vouching for the BJP, but just politics the way I see it in India
Ravi – You should read this…
http://in.rediff.com/news/2004/may/25jk.htm
Ravi, did you see this letter by swaminathan aiyer to his brother?
http://economictimes.indiatimes.com/articleshow/698490.cms
Raising petrol prices is not about abolishing subsidies or not about rising crude prices. It is hunger of oil companies coupled with that of Politicians to have more money at their disposal otherwise how do US, China or Malaysia sell petrol cheaper than India. It is all about taxes on petroleum product, which increases the price and not the crude itself. Obviously more taxes mean more money to Politicians who can then spend money for their leisure.