Another fuel price hike likely?

I was just reading news that another petrol price hike is likely to come, once the elections in the five states are over. And I couldn’t help but agree with that article, even though crude prices are expected to slide down due to lack of demand globally and price of US Dollar going down in the recent days as well!

Because at the end of the day, even though the government might claim that petrol prices are deregulated, fact of the matter is, majority of petrol in India is sold by government run oil companies and these companies have no option but to listen to the government, which in turn is run by the political compulsion of the parties in power. Who let’s face it, are only interested in vote bank politics to get to power and then remain there!

So where does all this leaves consumers like us?

Well to be blunt, we are screwed either way!

If the government does not raise cost of fuel (highly unlikely), it will have to shell out more money from its coffers to subsidize Diesel, Kerosene and LPG. This in turn would deepen the deficit, forcing the RBI to buy more government bonds by printing more money and thus lessening the value of Rupee and causing inflation.

If the government increases the price of fuel, especially diesel, it will have a direct impact on prices and inflation, which has only somewhat slowed down in the recent days.

Add the whole mess Europe and US is creating in Iran (a big supplier of crude oil to India) and the situation looks grimmer than usual. And frankly speaking, the only way out for the common man is to just make more money, which is getting harder and harder to do, each day!


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