Fuel Price Hike
Friday, 6th June, 2008
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Inevitable Decision United Progressive Alliance (UPA) Government on Wednesday midnight took the ‘inevitable’ decision of increasing the fuel prices. Soaring oil prices is the international oil market had put the Indian Government into a tight spot. Subsidies were increasing and the financial situation of the oil companies deteriorating day by day. Oil companies had left with a very low cash flow and an immediate decision was required to bail them out of the ‘gruesome situation’. These companies had been incurring huge losses for past several months and it was necessary to save them from being financially crunch.
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No Options Though the crude oil prices had doubled since the last year, rates of diesel and petrol had remained unchanged. Because of steep increase in International oil prices government had left with no options. This was an inevitable decision that was being expected by everyone. Though the decision is unpopular but it was required to ensure the uninterrupted supply of the petroleum products.
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Increasing Losses Defending the decision of his government, PM has said that to a certain limit government can keep the keep the consumer prices unaffected by the rising oil prices in the international market. If the oil companies go on incurring losses then they will be left with no money to import oil from abroad. Government had to take the tough decision as it had allocated large financial amounts for social sector programs and farming. All these programs require huge financial amounts that mostly depend on higher revenues of the Government.
Increase in Prices Government has increased the petrol prices by Rs 5, Diesel by Rs 3 and cooking gas by Rs 50 per cylinder but kerosene has been left untouched. This decision has been hailed by the Indian Industry chambers. On government’s part the custom duty has been reduced on crude oil from 5 per cent to nil, and on petrol and diesel from 7.5 per cent to 2.5 per cent.
Alternative Energy Sources Almost all political parties whether they are in opposition, Left or UPA’s allies have criticized the decision as many of them have threatened to launch national wide protests. This criticism of government is only politically motivated. Oil shocks have always slowed down the growth rate. To avoid this kind of setbacks and criticism government will have to look for the alternatives of the petroleum energy in future.

