Read Editorial – Hike of fuel prices: On a glide path?
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MEANINGS are given in BOLD
Hiking (raise) fuel prices at petrol pumps is such a politically fraught (causing or affected by anxiety or stress) exercise that there is even a hesitation (the action of pausing before saying or doing something) to decrease prices so as to safeguard against a possible spike (form into or cover with sharp points) in global petroleum rates in the future. It is worth watching, therefore, how the proposed pilot project by the three public sector oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — proceeds as an effort to reform the pricing mechanism.
Starting next month, in select cities fuel prices at the pump point will be reset daily in tandem (having two things arranged one in front of the other) with global oil price movements. Till the project’s outcomes are assessed (evaluate or estimate the nature, ability, or quality of), the rest of the country will continue with the existing system, under which petrol and diesel prices are calibrated generally on a fortnightly (every two weeks) basis. If one considers the latest price change effected by oil companies (3.77 reduction per litre in the price of petrol accompanied by a ₹2.91 cut for diesel on March 31), the case for a daily price reset makes eminent (present to a notable degree) sense.
Apart from the fact that it is illogical for an economy integrated with the global financial and commodity markets to keep fuel prices unchanged for as much as a fortnight, aligning prices daily and spreading out the degree of change will lessen the impact on consumers, on both the upside and the downside. Marginal changes in the daily price of fuel will not make or break consumer confidence or fuel inflationary (characterized by or tending to cause monetary inflation) expectations, at least because of oil costs, as it currently does.
A more gradual ascent or descent in fuel prices, rather than abrupt shifts over randomly selected intervals, makes good sense, given how closely our fiscal (relating to government revenue, especially taxes) outlook is tied to oil price movements. The United Progressive Alliance government had freed (remove something undesirable or restrictive from) the regulation of petrol prices in late 2010, and the National Democratic Alliance government followed through by liberating diesel prices within six months of assuming office in 2014.
Such dismantling was necessary as previous attempts at abandoning (give up completely) the administered price mechanism for India’s largely import-dependent consumption of petroleum products never really took off, even as subsidies distorted (giving a misleading or false account or impression; misrepresented) the system further. The fortnightly system of price resets for both fuels has been followed over the last three years. The latest price cuts came after more than two months of no change, overlapping with the Assembly elections in five States.
A transparently formulated and dynamic pricing regime (a government, especially an authoritarian one) would hopefully prevent such distortionary coincidences in the future. It would also allow private companies to compete with the PSU oil marketers, which today control 95% of fuel outlets. The government, on its part, must start winding down the extremely high petroleum product taxes imposed since June 2014, when oil prices began to fall, along with its energy subsidy (a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low) liabilities (the state of being legally responsible for something).
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