Currently India is among the nations which pay the highest prices for gasoline (petrol). The current petrol is hovering around INR 70 (USD 1.46/liter). There are numerous reasons for this. Currently the supply from many of the countries is on the low side due to ongoing conflict state of affairs. In contrary to this, there is currently a decline in demand from Europe due to Italy and other countries.
But what is happening in India. Currently India is facing shortfall in exports; both in manufacturing and services. The current IIP (Index of Industrial Production) have gone to the 2 years low. RBI has increased the cost of lending by increasing the interest rates on loans. This has affected the manufacturing sector both supply and demand side. The Software services are experiencing turbulence. Infy is currently facing the music for migration related issues in the US, its biggest market. Wipro is currently not at its best right now. Due to Satyam, the image of the IT companies has taken a beating. The imports are currently at the same position. Even with increase in prices, currently there is no shortfall in demand of petroleum products. This has led to the deterioration of Rupees – Dollar exchange prices. Three months back the USD was floating around INR 43-45. Currently due to export crisis, it is around 48. Due to Europe and Middle East crisis, the crude oil prices have also increased. Currently it is at $115. Three months back it was below $100. This has become a double blow on India. So if we see, before we use to pay INR 4,300 for a barrel, currently we are paying 5,520; a rise of around 28%. What can be done about it? Will the prices ever come down?
I think the answer is yes. But it has to be worked upon. Crude prices are not in our hands. As suggested by the Planning commission, Sovereign Wealth Fund (SWF) is not a solution. Even after forming SWF and investing in petroleum assets, there is no proof that we can gain significant control of crude oil prices. Also SWF will result in suboptimal returns; well that's a different topic altogether. The best thing to go for is reduction in usage in all forms; whether its diesel, petrol, kerosene, derivatives etc. The other thing is fiscal austerity measure. In current form we are paying around 55% of the prices as tax to the State and Central Government. With the prices rise, the taxes we pay also increases and who would not like rise in income. That's why no State/Central Government is interested in decreasing the taxes. And also they would not say anything about price rise. The tax on petroleum products should reduce.
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