In yet another move to add salt to the wound of inflation and the rising prices the recent price hike comes in the most unexpected manner recording the highest, steepest increase in the rates by far. And I am now cursing myself for going the petrol version of a car.
Looking at the reasons why the hike was effected, the obvious and the most commonly quoted reason is the hike in the global oil prices. Added to this are the other reasons as well,
1) Depreciation of the rupee. Since it is an import and the payment is made in the international currency rates, the fall in the rupee value or the concept that the dollar gains over the rupee means that the rupee payments have to be more than earlier to make up to the same number of dollars as earlier. That would imply an increased burden on the exchequer of the oil companies and naturally that is transferred to us.
2) Shortage of the fuel. Of course the increased fuel rate is also cos of a supply side constraint. We all know about the Iran situation and the multiple sanctions. Although India is still good with Iran and doesn’t have many conflicts, the issue still remains on the global front and the confusions still remain while trading in the international market. With the shortage in the international market, the demand naturally increases making the resource scarcer than it already was. So that tells another part of the story as to why the hike.
3) Petrol price De-regulation. In a move by the government to liberate itself from the monetary support and the tremendous pressure on the govt exchequer, the govt decided upon the recommendation of the Kirit Parekh committee which recommended that it was time that the govt moved on from these economic pressures to the more pressing ones like bringing in the economic imbalance and the social structure to a much better shape.
Despite the above reasons, the effect of the petrol price hike is also a pain to suffer.
1) Of course the obvious reasons that the commutation rates are going to increase. It still hurts to fill the vehicle with around a Rs.80 for a liter of petrol. Maybe one good fall out of this might be that the public would start focusing on the mass transportation systems. But I seriously doubt whether I am kidding myself when I talk about the mass transports. The unreliability in the timing, the traffic congestion, the traffic signals. There doesn’t seem to be a strong way where mass communication is going to replace the individual commutations. One way this can happen might be the metros and the connecting vehicles from the metro to the nearest stations. That still is a far way ahead.
2) Spiraling effect of inflation. it is not a closed structure when it comes to the way things work with the economy. One thing changes leading to the change in some other things and the whole issue spirals around. With the hike in fuel rates, the transportation in the petrol dependent vehicles is going to increase and this would lead to a greater dependence on the alternate one which is diesel which would again invariably undergo a hike owing to the old tradition that diesel hikes are very close whenever there is a drastic petrol price hike. Diesel hike is far more dangerous considering that most of the transportation of goods happens with this, which would mean a round about inflation, increase in the rates of the commodities since most trucks and transportation works on diesel and again a spiral realizing the hike in almost everything including the bus fares and the auto fares. It is quite clear that no particular event in the governance is a singular one.
It would make more sense for me to keep adding reasons as to why the petrol price hike is bad but most of us know why it is bad and every time we go to the fuel station, the reasoning pops out as to why it is good. And as to the question as to why it is good, I can only point to the possibility that maybe we start respecting the scarce fuel a little more than we used to earlier cos we know that when the pocket pinches, we always find ways to avoid it cos it is a more imminent and an immediate challenge as compared to global problems like scarce fuel, pollution, global warming etc. I would again be wrong to say that it is a good move, but the only question here is as to why it was a necessity and how it is going to make an impact. I guess we would have to wait a little more to see how things shape up from now..