The government has, for the third time in two months, raised excise duty of petrol and diesel by Rs. 2 each. This means there’s no change in the retail prices of petrol or diesel. (Effectively, Oil Marketing Companies have cut the prices of petrol and diesel, and the increased excise duty makes up for it)
The government has to do this on it’s deficit problem, which we explain as reaching gargantuan proportions as of November.
And then the problem arises: are prices really free? We don’t see competition here, and the government is rejigging things all the time. The OMCs act like a cartel. There’s no real pricing freedom – either the government pushes losses on the OMCs or they decide to earn more profits as a cartel.
Crude prices could fall further, but on some random excuse we won’t see the benefit in lower fuel prices. The lack of clarity in fuel has driven the private retailers out of the business (with the exception of Shell, which doesn’t price much lower than the oil marketers either).
At some point, we should see the governnment privatize at least one of the big OMCs so that we can see real competition. If subsidy ever returns, we should be able to give it to private players as well.
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