Increase of oil prices

It is economically incorrect to call it as increase. It is simply withdrawal of protection hitherto offered. The move that our government took, will allow the domestic prices to reflect international oil prices and domestic prices will, hereinafter, directly proportionate to international prices and will vary accordingly.

In other words, a common man in the twin cities will pay, to his petrol or diesel consumption, in accordance with the international market crude oil prices.

We import about 80% of our oil needs. Earlier Oil pool account, maintained by central, used to absorb these shocks and domestic prices were unaffected by International markets. When government buys oil internationally and sells domestically, any surplus, account gets credit and any deficit, account gets debited. NDA government has withdrawn it and has introduced administered price mechanism (APM).

Indian Government took advantage of low crude prices in the global markets and has decided to with draw its support to APM and to let the markets determine oil prices henceforth. However, it has simply ignored the double digit inflation and already sky rocketed prices. In any developed economy, where free pricing is prevailing, the inflation will not cross more than 3%. This increase will have cascading and spiral effect on the prices, inflation and economy as whole.

But it gives enough inflows to central to meet huge fiscal deficit, divestment of oil PSU stocks as they quote high because of the reduction of losses and some benefit to our Andhra Pradesh as it reaps some income on every drop of oil that is burnt in the state.

Government shall provide subsidy to Public Transport – Jayaprakash Narayana, Loksatta

This is the statement given by self proclaimed intellectual politician in the Andhra Pradesh. He distinguishes himself from other politicians stating that he thinks about welfare of the people and his thinking is long-term and now, he talks about populist subsidy measure, only reveals his empty ideology and lack of depth in economics. We would have been happier had he commented on the timing.