Petrol deregulated, fuel prices increased

[Clarke]

The government on Friday freed up state-subsidised petrol prices and hiked other fuels as high global oil prices and pressure to trim the budget deficit outweighed concerns about the political impact of the measures. A panel of ministers increased prices of state-subsidised diesel, kerosene and cooking gas prices, which could help reduce the fiscal deficit from the projected 5.5 percent of 2010/11 GDP and free up revenues for other programmes. The panel said petrol prices would be market driven, rising 3.50 rupees per litre, while kerosene prices would rise by 3 rupees a litre. While petrol is mainly used by the middle class for cars, kerosene is used by the poor for power. Diesel prices will rise 2 rupees per litre and will be freed up in the future. Cooking gas prices were raised by 35 rupees a cylinder. "It was decided that the price of petrol will be market determined both at the refinery gate and at the retail level," Oil Secretary S. Sundareshan told reporters. India's benchmark bond yield rose 2 basis points immediately after the news on concerns that the hikes would push up inflation. The benchmark 5-year swap rate rose 1 basis point to 6.74 percent while the 1-year swap rate rose 2 basis points to 5.50 percent. Shares in Indian oil firms rose more than 3 percent on the news. In early June, the Congress-led government held off the decision after two powerful ministers from coalition parties stayed away from a ministerial panel meeting, signalling opposition to the move on fears of voter backlash. Finance Secretary Ashok Chawla told Reuters this month he expects the fiscal deficit to shrink to 4.5 percent of GDP in fiscal year 2011 if fuel prices are deregulated and on the back of other revenues including the 3G spectrum auction. Fuel accounts for a quarter of its estimated subsidy bill of 1.2 trillion rupees (.5 billion). Before Friday's announcement, projected losses for oil firms are estimated at .4 billion this year, based on an average crude price of a barrel. Congress was handed a second term in office last year on the back of the ruling party's pledge to share the spoils of years of economic boom and protect hundreds of millions living below the poverty line. The government backed out a few months ago on freeing up farm prices after street protests. Asia's third-largest economy has been eyeing new ways to reduce subsidies since the failure of its 2002 attempt to get state-owned refiners to fix prices every two weeks in step with global rates. Rival Asian giant China by contrast abandoned similar fuel price subsidies from January 2009 to great effect for then-struggling refiners grappling with losses, as Indian state-owned refiners do now. ================= About time i guess, people in general have to pay up for what they use .. trouble is it hurts the poor much more than the middle/upper classes. Diesel prices impact all goods because of travel cost and kerosene runs the poor man's lantern and stove.

[achilles]

It is a great decision for India economically. By economically, I mean in financial terms. For long our companies have faced a lot of losses coz prices didn't go up even when the international rates kept fluctuating. However, from the citizens' point-of-view, the timing is outrageous. Nothing is affordable now. The coalition parties with the Congress are steering themselves clear to avoid the pinch of the political ramifications to their parties. Almost all of Congress' allies are against them in this decision. Inflation and rising prices might take this Congress government down. The "Aam Aadmi" might desert them if the prices of atleast, the essentials, don't come down.

[Clarke]

Inflation and rising prices might take this Congress government down. The "Aam Aadmi" might desert them if the prices of atleast' date= the essentials, don't come down.

It did not happen in the previous term. Expect a master stroke like the farmer loan waiver scheme right before the next election. Even otherwise, the govt has introduced the right to education act and the proposed food guarantee act could go a long way if implemented efficiently. It does not look like the opposition has some aces up its sleeve in any case.

[rkt.india]

The price of a liter petrol will be 18 rupees without the taxes employed by central and state gvt...now u can see how much taxes employed on Petrol even more than pakistan and other developed countries...its ridiculous...

[achilles]

It did not happen in the previous term. Expect a master stroke like the farmer loan waiver scheme right before the next election. Even otherwise' date=' the govt has introduced the right to education act and the proposed food guarantee act could go a long way if implemented efficiently. It does not look like the opposition has some aces up its sleeve in any case.[/quote'] The problem with India is the lack of a quality opposition, which can keep the government on its toes. This government has done a million good things and will do, lets say a zillion good things. But if a mother can't feed her child even after the father slogs for 16hrs a day, there is no use of these schemes. Chandrababu Naidu lost the election only on this ground. So did the BJP government in 2004. We might see the re-return of the syndrome if the Congress doesn't move into damage control.

[achilles]

The price of a liter petrol will be 18 rupees without the taxes employed by central and state gvt...now u can see how much taxes employed on Petrol even more than pakistan and other developed countries...its ridiculous...

Yes. But Pakistan being an Islamic country and its close proximity to Iran and the Middle-East helps. To top that, they don't even have the kind of population we do. And in terms of economics, if the government wipes off the taxes, zilch goes into the pocket, which would mean even slow development, excessive dependence on the World Bank and loans from "rich" countries, instability in the economy and the long-terms ramifications would be enormous. Although I sympathize with the present government, they just don't seem to strike the right balance.

[rkt.india]

Yes. But Pakistan being an Islamic country and its close proximity to Iran and the Middle-East helps. To top that, they don't even have the kind of population we do. And in terms of economics, if the government wipes off the taxes, zilch goes into the pocket, which would mean even slow development, excessive dependence on the World Bank and loans from "rich" countries, instability in the economy and the long-terms ramifications would be enormous. Although I sympathize with the present government, they just don't seem to strike the right balance.

I am not asking to wipe off the taxes...but reduction of the taxes will help.....and I dnt think we are even developing at 0.1% a year while MMS saying we are growing 7%........bas ameer aur ameer hote ja rahe hain aur gareeb badhte ja rahe hain...gareeb aur gareeb hote ja rahe hain...this is not development and look at these articles.... http://www.managementparadise.com/forums/articles/28356-how-petrol-price-calculated-india.html http://www.rediff.com/money/2003/aug/27tax.htm http://www.rediff.com/money/2007/mar/06petrol.htm

[achilles]

I am not asking to wipe off the taxes...but reduction of the taxes will help.....and I dnt think we are even developing at 0.1% a year while MMS saying we are growing 7%........bas ameer aur ameer hote ja rahe hain aur gareeb badhte ja rahe hain...gareeb aur gareeb hote ja rahe hain...this is not development and look at these articles.... http://www.managementparadise.com/forums/articles/28356-how-petrol-price-calculated-india.html http://www.rediff.com/money/2003/aug/27tax.htm http://www.rediff.com/money/2007/mar/06petrol.htm

Its true that the Rich are getting rich and gareeb aur bhi gareeb ho rahe hai. And the common man doesn't really care about the schemes of the government if the same government can't even fill their bellies. which is what I said in Post #5. Reducing the taxes might help but even if the Centre does it, the state government might not. Taxes are their bread & butter and if it is a non-Congress State guv, expect ZERO adherence to the centre's directives. Also, the development factor is a crucial one coz eventhough we have massive execution issues with our projects, they still reach completion, thanks to the silent workers, whoever they may be. Cutting taxes might hurt them and demotivate them from working hard coz their budget is already tight, given the peanuts they get after the "tax depreciation" that takes place at various levels. The keyword for the government in this term is "balance".