Last week the government raised a storm of protest by increasing petrol price by Rs. 1.82 per litre. Food inflation has reached the dizzy height of 12.2 % and the UPA has failed miserably to contain the price spiral. It is the fifth petrol price increase since January. The rationale is that oil PSUs should be allowed more money. Parties like the Trinamul are rightly on the warpath. Petrol price decontrol has not taken place in actual fact. Otherwise the autonomous oil marketing companies would not have needed the government’s nod in the matter. Petrol prices were said to have been deregulated last year. But even when global crude costs dipped, there was no lowering of petrol prices in India. The oil companies are forced to sell at heavily subsidised prices. The price rise from time to time is to offset the cushioning. The government is saddled with debt and incapable of honouring its oil bonds. Reform has only been on paper and consumers are feeling the pinch badly. Deregulation means to the public ever rising prices and not relief.
The Prime Minister’s proposal for deregulating most prices would have been welcome if such measures were not likely to be half baked. In the present circumstances, the wealthy will be forced to use diesel-run vehicles. Adulteration of oil and smuggling will be on the rise as will be inflation. Decontrol should go along with lower levies. There is need therefore for liberalisation of diesel prices along with that of petrol prices. That will increase oil PSU profits and will result in greater private participation in retail. Market efficiency will gear up and cartelisation of private parties will be ruled out. Consumers will benefit. The government should accordingly opt for full deregulation.
