The ruling coalition government in India increased the fuel prices substantially today, with petrol costing Rs 5 more, diesel costing 3 Rs more and LPG which is used for cooking costing Rs 50 more.
In today's world of high oil prices, this price increase though substantial as it may be, may not go far enough in helping out the beleaguered public oil companies in India. According to some estimates, they are losing about Rs 1930 billion rupees by artificially keeping the price of petrol and diesel low, and another Rs 550 Billion rupees by offering subsidies on LPG and kerosene.
Also the government should seriously consider getting out of the business of fixing prices for commodities that are so volatile, and whose prices are not just influenced by supply and demand. The government should let the market forces fix the prices for these products as it would be good for the economy in the long run.
Read a good article arguing Why the Government should not fix prices of fuel
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