Everyone and then their uncles have written about the high prices of oil, the fuel price hike in India and its impact on the economy. Let me look at from another angle. After all I had been once an Oil marketing man myself during my stint early in my career with Hindustan Petroleum Corporation(and I shall try my best not to do a Government bashing).
The core issue is that we are large scale net importer of oil that has to be paid in US Dollars. Any increase in global oil prices will increase our import bill substantially. This should not a major problem as India has record foreign exchange reserves.
The second issue is that higher prices of Diesel will lead to increase in transportation costs that will ultimately result in higher inflation. Also any increase in the highly subsidised kerosene will adversely impact the poor (how far this is true is another question. the cooking and lighting pattern of the poor have changed during the past 2 decades).
Fine so far. What people do not know is that Government, both central and state, have taxed the fuel products to such an extent that nearly 40% of petrol and diesel prices goes towards central and sales taxes. In fact, it is said that Governments welcome a chance to raise the fuel prices as it means the taxes will increase and they will have more money in the coffers (Even the left front governments, who calls for a hartal everytime the fuel price is hiked, refuses to reduce the Sales Tax to ease the burden on common man. Such is their hypocrisy).
One of the reasons for the high global oil prices is the increase in the energy demands of emerging nations, of which India is the leader. Now, don't mistake me, I am not going to be a George Bush and tell you that we should use less energy. But this point of increased use of energy comes in to consideration while discussing the solutions.................to be continued
