In the current scenario, the fiscal deficit of India is ruling at 5.9% in 2012. The economic burden seems to be increasing on the government. Reasons are being cited for it as less-efficient government spending, lower tax etc. However, the "curse" of diesel subsidy needs to be paid attention. There has been situations when the economic changes were observed like hike in petrol prices, lowering of petrol prices etc but no attention was given to the diesel prices. According to C Rangarajan (Chief Economic Adviser of PMEAC), Diesel price should be increased in phase because any such step directly effect common man the most.
Why we need a revision of Diesel Prices?
1. Subsidy means that the extra burden has to be borne by the government which directly affects the fiscal deficit.
2. The inefficient use of subsidized goods just because it is sold at a cheaper rate. Hence the profit base of companies (Specially the Public sector ones) gets affected. ( One must keep in mind that our PSUs are far behind as compared the private markets).
3. Adulteration is a burning issue in Indian Market (The reason is absolutely clear).
In this fiscal year, due to "drought" in as many as 6 states of India, Diesel sales have gone up exponentially. In july itself, the sales have increased by 13%. For every litre , the under-recovery for a company is Rs 14 and hence they have been constantly pushing the government for reducing the subsidies. In the first quarter itself, the under-recovery touched Rs 47,811 crore which is surely a concern for their profitability in the long rum and the capital expenditure. The increase is sales have been also due to the power shortage in many parts of India (Around 21 states got affected).
It is equally true that these steps will invite protests from many corners of India ( May be even by the opposition parties and the state governments), but future development must be well understood. Importantly, we should not forget the economic policy of 1990 (THE FAMOUS LPG CONCEPT), which transformed India into a global Economy. Had the economic review policy of 1990 not been adopted, our economy would have remained a closed one, Government based, no role for private parties, we could not have been able to compete with the global economy.
It is the right time to bring some regulation in economic policy as far as diesel is concerned for sustaining a comparable growth in future.
Why we need a revision of Diesel Prices?
1. Subsidy means that the extra burden has to be borne by the government which directly affects the fiscal deficit.
2. The inefficient use of subsidized goods just because it is sold at a cheaper rate. Hence the profit base of companies (Specially the Public sector ones) gets affected. ( One must keep in mind that our PSUs are far behind as compared the private markets).
3. Adulteration is a burning issue in Indian Market (The reason is absolutely clear).
In this fiscal year, due to "drought" in as many as 6 states of India, Diesel sales have gone up exponentially. In july itself, the sales have increased by 13%. For every litre , the under-recovery for a company is Rs 14 and hence they have been constantly pushing the government for reducing the subsidies. In the first quarter itself, the under-recovery touched Rs 47,811 crore which is surely a concern for their profitability in the long rum and the capital expenditure. The increase is sales have been also due to the power shortage in many parts of India (Around 21 states got affected).
It is equally true that these steps will invite protests from many corners of India ( May be even by the opposition parties and the state governments), but future development must be well understood. Importantly, we should not forget the economic policy of 1990 (THE FAMOUS LPG CONCEPT), which transformed India into a global Economy. Had the economic review policy of 1990 not been adopted, our economy would have remained a closed one, Government based, no role for private parties, we could not have been able to compete with the global economy.
It is the right time to bring some regulation in economic policy as far as diesel is concerned for sustaining a comparable growth in future.
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