The govt deregulates oil prices – and takes the most dangerous step in our economic history to become a disaster prone ‘oil-shock’ economy
Though open market systems are good for oil companies (particularly private players like Essar Oil and Reliance Petroleum, who are at a disadvantage w.r.t. public sector players), it brings volatility at the consumers’ end. Immediate lessons by India can be derived from the Chinese energy market, which is based on the principle of managed-market-based economy. Gasoline prices are strictly controlled. Even the prices of key energy resources like coal are not free for the markets to decide. The National Development and Reform Comission (NDRC) of China openly interferes with the petroleum prices. The last time NDRC revised the wholesale price was in November 10, 2009.
The reality is when oil prices increase, it increases the overall cost of the economy. Moreover, when prices of crude oil go up, it also directly or indirectly increases the cost of other commodities. India has a huge consumption of around 133.40 MT of crude oil. The main reason why India was less impacted by recent recession was the controlled crude oil price policy. Imagine over 400 million middle class Indians paying for petrol at a rate of over $100 per barrel. Even India had no control over oil prices till 1973, but it didn’t pay rich dividends. One would remember that a belligerent decision to deregulate petrol prices was taken in 2002 but the government had to revise its decision later. A good parallel can be drawn with our stock markets. Till the time Indian stock exchanges were independent and separated, they were stable; the moment they were opened to the foreign players, they became volatile and left the investors vulnerable. Increase oil prices for all you must, but deregulating oil prices is clearly not the need of the hour; not now, not in the next few years – the government should immediately reverse the decision.
The reality is when oil prices increase, it increases the overall cost of the economy. Moreover, when prices of crude oil go up, it also directly or indirectly increases the cost of other commodities. India has a huge consumption of around 133.40 MT of crude oil. The main reason why India was less impacted by recent recession was the controlled crude oil price policy. Imagine over 400 million middle class Indians paying for petrol at a rate of over $100 per barrel. Even India had no control over oil prices till 1973, but it didn’t pay rich dividends. One would remember that a belligerent decision to deregulate petrol prices was taken in 2002 but the government had to revise its decision later. A good parallel can be drawn with our stock markets. Till the time Indian stock exchanges were independent and separated, they were stable; the moment they were opened to the foreign players, they became volatile and left the investors vulnerable. Increase oil prices for all you must, but deregulating oil prices is clearly not the need of the hour; not now, not in the next few years – the government should immediately reverse the decision.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri's Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
