This has been a raging debate for a while now – Just to give a perspective, in India prices for fuel (Petrol, Diesel, Kerosene, LPG etc) are regulated by the Government. In today’s scenario for example, the market prices for Petrol are cheaper to consumers by about Rs. 4.50/-.
The global fuel market is quite volatile and price fluctuations depend on global circumstances and demand. Now, what Indian Government does is, if the fuel prices are higher, they still keep it at lower rate by chipping in the difference and making up for it when the fuel prices are lower.
In country like India, fuel prices are a very sensitive issue, and it can literally bring down a government. None of the earlier governments have taken decision on this precisely for this reason. However, Congress is currently enjoying a good majority in the parliament and probably can take this step without worrying too much.
Globally, in most countries like U.S & U.K, fuel prices are unregulated – In U.S for example, prices at gas stations change on daily basis depending in the Global market rate.
Now, the raging debate over past few months has been whether Indian Government should do away with fuel price regulation or not. The EGoM (Empowered group of ministers) are expected to take a decision on a proposal freeing fuel rates today.
If the regulation is removed, petrol & Diesel prices will go up by Rs. 4.50 & Rs. 2 respectively.
Here is my perspective on this – I have no doubt whatsoever, that in the longer run freeing up Petrol prices is the right way to go. Yes, it would be a burden on consumers but fuel price regulation is one of the sore points of Indian Economy and has to be dealt with.
Fiscal Deficit is very high currently and one of the primary reasons is – regulated fuel prices – which is expected to put a burden of 70,000 to 80,000 crore rupees in this fiscal alone.
Although, the left parties are sure to oppose freeing up of prices, it is important to be done from Macro economic perspective.
Government can also take a middle path, where Fuel prices can be freed up within certain band, and if prices tend to go beyond that (like 2 years back when it went beyond $150 per barrel ), government can take action.
So what are readers views on this – Would love to listen to your perspective.