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Petroleum Product Pricing in India - Who Benefits? Edit
Article Title Petroleum Product Pricing in India - Who Benefits?
Published In N.A
Publisher Name British High Commission
Abstract We Indians are having a habit of making things complicated and the pricing of petroleum products is the one fine standing example of this. We made it so complicated that even the experts find it difficult to understand. To me it looks as though this is made so complicated for two reasons. Firstly, to make it difficult to understand and secondly to make it more debatable. If we go and analyse the problem, standing outside, then we can see that there is no reason why anybody should feel bad about it the oil companies (owned by government) or the government itself. Am I sounding like prank? Read on?... Petroleum product pricing in India is frequently seen as a black hole of subsidies. All most all the Indian economists and the Oil Marketing Companies, all oil companies are not in the business of marketing, complain about the impacts those subsidies have on public finances, financial performance of OMCs. However, on closer analysis, the issue of petroleum product pricing in India is more complex than the one-way flow of subsidies reported in the press. So the question to be answered is: how high are subsidies really? Common sense dictates that with subsidy the retail price of products should be less. But it is not true in our case. Our retail prices for petrol and diesel are relatively high despite subsidies. In fact, the total Government (central and states) taxes and surcharges on petrol products exceed by far the annual budget subsidies for these products. There is thus a certain rationale for the Government to maintain the current system though it does have negative implications on the financial health of public oil companies and acts as a deterrent to private investments in the sector. The often heard noise is that the rationale for providing subsidies, is to allow poorer segments of society access to commercial fuels. This could not be proven conclusively as there has never been a study on this to establish that. This leads to irrational choices among different fuels being made due to distorted retail prices. The Indian energy market and the economy as a whole would be better off if the Government would implement a consistent, transparent and rational fuel pricing system but with a view to political imperatives, this is unlikely to happen in the short-term as we know why.
Author's Name Dr Joel K Pandian
Full Text Not Available
Year 2006
Submitted By (User Id) joel.pandian@foc.gov.uk
Submitted By (Org) British High Commission