The petrol price is de-regulated in India from 26th June 2010 by central government. Why this is becoming one of the major political issue? And what is meant by de-regulation? What is the effect of de-regulation or removing APM (administered pricing mechanism)?
First off all as the commoner concerned it is simple increase in the price of fuels he use – petrol/diesel/LPG/kerosene. And resulting price inflation of all consumer items.
De-contr
olling:
Earlier the government was fixing the price for fuels based on the international crude price and local political sensitivity. This was for the PSU oil marketing companies (IOC, HPCL, and BPCL) only. The private players like Reliance, Essar or Shell tried to match the government pricing but on a higher side. Or removing APM will give the OMCs right to price their product based on their expenses and margin.
Taxes, T
axes and Taxes:
A major part of the fuel price in India is the tax component. The main part is the central excise which goes to the central government. Other is the state and local bodies’ taxes. This varies from state to state and city to city. Hence there is a difference in prices at different parts of India. So whenever the price is increases government earns more money through taxes.
How to find an effective solution?
There are two components to control the price of fuel and resulting inflation or burden to common man.
First off all as the commoner concerned it is simple increase in the price of fuels he use – petrol/diesel/LPG/kerosene. And resulting price inflation of all consumer items.
De-contr
olling:Earlier the government was fixing the price for fuels based on the international crude price and local political sensitivity. This was for the PSU oil marketing companies (IOC, HPCL, and BPCL) only. The private players like Reliance, Essar or Shell tried to match the government pricing but on a higher side. Or removing APM will give the OMCs right to price their product based on their expenses and margin.
Taxes, T
axes and Taxes:A major part of the fuel price in India is the tax component. The main part is the central excise which goes to the central government. Other is the state and local bodies’ taxes. This varies from state to state and city to city. Hence there is a difference in prices at different parts of India. So whenever the price is increases government earns more money through taxes.
How to find an effective solution?
There are two components to control the price of fuel and resulting inflation or burden to common man.
- Reduce the tax part of the price. Let the central and state governments to share the burden and ready to reduce the tax income from fuel. Any how government is doing some favor to OMCs to compensate their losses. Instead of that let there is a cap on the taxes so that the price is limited.
- Make the oil marketing companies more efficient. Common man will be surprised by the news that OMCs give huge credit to airlines and finally write off some of them to get the dues.
Epilogue: The Subsidy when started supply only for the elite class
When the petroleum industry started in India, or before 1990s, availability of LPG or usage of petrol was very less and confined to the elites and babus of big cities. Then why government of that time started off to offer discounts or ---to these products?
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