Oil Price Hike and the Inevitable

It is official. The inevitable has happened at last. After increasing the price of petrol by Rs. 4 per liter and diesel by about Rs. 2 per liter, the Government has in principle agreed to allow the price of petroleum products to be decided by OMCs if the price crosses $75 per barrel. This will obviously have a cascading effect on the prices of essential commodities which in turn on the inflation. This is inevitable though as the Oil Marketing companies(OMCs) had been incurring a loss of Rs. 6.50 per liter of petrol and equally in diesel, LPG and Kerosene. Part of the high price can be attributed to Central and State taxes which account for about 55 per cent of the retail selling price of petrol and 34 per cent of diesel. The left have been demanding a cut on taxes instead of increasing the retail price of petroleum products. Looks like the government have struck a balance between the price hike, tax reduction and bonds. One thing I fail to understand is attitude of the government here. The government should in fact regulate the price of petroleum product when the price is high. But the Government is trying to do it other way around.

Need for an alternate source of energy
The international crude oil price which $25/barrel in September 2003 is now hovering around 73$/barrel and is soon expected to touch $100/barrel. Infact, it looks very much inevitable considering the phase in which the world community(especially India, US, China and European countries) are consuming the natural resource without giving much thought that we are depleting it very fast and the alternate means of producing oil proving to be atleast as costly. It invariably mean that the prices of petroleum products will keep raising. While the world community is already searching a way out either by might or by identifying alternate sources of energy, the top politicians and bureaucracy in India are quiet oblivious to this is quiet difficult to understand.

The short-sighted attitude of the governments and the bureaucracy is very well evident by the way they are trying to handle this long-term emergency. The Indian government should work on finding alternate source of energy instead of considering raisin the price, cutting taxes or issuing of bonds every time.