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Economics Article and Commentary

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NEWSPAPER ARTICLE AND ITS ANALYSIS

Petrol price hike: State-run oil firms raise petrol prices by up to Rs 7.50 per litre

INDIA: State-run oil firms announced the biggest-ever hike of about Rs 7.50 per litre in petrol prices, triggering angry protests from political parties, including coalition partner Mamata Banerjee, who angrily denounced the unpopular move, but stopped short of pulling out of the government.
The increase, which amounts to 11.5% in Delhi, will help oil companies, which reported losses in three successive quarters, but will not ease the country's mounting subsidy burden because losses from below-market sale of petrol are borne entirely by state firms.

The government foots the bill for subsidized sale of cooking gas, kerosene and diesel, which will continue to be sold far below market prices unless the empowered group of ministers approves a hike.
Oil industry officials said they hoped to withstand political pressure to partially roll back the increase in petrol prices. "We are keeping our fingers crossed," one executive said. Diesel prices, at Rs 40.91 per litre in the Capital, remain unchanged, making petrol almost 80% more costly. This would accelerate the shift in demand from petrol to diesel cars, industry officials said

     

      There are some commodities, which affect the society on a very large scale in terms of, economic as well as social fronts. Diesel, Kerosene and Cooking Gas come under such categories. While Diesel is used in industrial and agricultural work on a very large scale, Kerosene and Cooking Gas have direct relation to the last household of the country. Thus any increase in the price of these commodities directly affects the life of ordinary people. India’s demand for the fuel will always be high as it’s an inelastic good and most importantly fuel is a necessity. But it will be inelastic only for the people who can afford it; for the rest they will use alternate mode of transport. Due to these high hikes...

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