With the new mandate, the new government and the brains behind the government are thinking about introducing the market controlled petrol and diesel prices. Simply put the petrol prices will work exactly the same way as it does in the US with a twist.
The twist is this. The oil marketing companies can decide upon the rate at which they will sell a liter of petrol or diesel as long as the oil per barrel rate remains below $60 (or $70 or whatever the chosen number). If it crosses that level government will step in and decide the price.
That looks like a very interesting prospect and possibly the only solution for India. Two things are taken care of with this proposal. One is the loss of revenues for Oil marketing companies, which are magnified when the oil is at $147 per barrel. Now, those losses will be minimized if the barrel is below $60. The losses are not gone completely.
Second thing is letting the marketing companies run the prices which itself is a danger. These companies can typically work like a cartel, and the prices at the highest level. This would defeat the purpose of introducing the market rated prices.
There is still a risk of cartel when the oil rate is below $60. But, we have to trust at some point and this might be it. $60 per barrel looks like the threshold for a win-win solution for the consumers and the companies.
I sincerely hope this time it is real. Without even considering the merits and demerits – if we have tried it once – then we will have enough evidence to know what works best.
If introduced this should put a lid on the free market pricing once and for all.
With so much back and forth happening in the past years, will it happen this time? If it does how will you take it?
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