The Union Government has at last announced the inevitable, a hike in diesel and petrol prices by Rs 3 per litre and Rs 5 per litre respectively. This is the second hike in a span of four months. On February 14, 2008 the price of petrol were hiked by Rs 2 and that of diesel by Re 1 a litre.
The move was necessitated to bail out the public sector oil companies that are suffering huge losses on account of selling fuel below cost.
The crucial issue to be debated is not whether the government is justified in increasing the price at this stage which Prime Minister Manmohan Singh is going to do tonight for the first time.
The most important issue is whether the nation can meet its fuel requirements at reasonable prices if crude oil prices move to $200 levels per barrel as predicted by some experts. What would be the resultant impact of such a price rise on several other commodities and the economy as a whole?
Speculation apart, demand-supply fundamentals don’t support lower prices of crude oil from the present levels.
This means that the nation should find an alternative to heavily subsidizing the fuel prices that would lead to large budgetary deficits.
The high cost of crude should make the policy makers think of other alternatives, for example increasing the content of ethanol by even higher levels rather than depend too much on fossil fuels.
The rising prices of crude is a reminder that the nation should look at investment in research and development (R&D) on alternative fuels or more oil exploration within the country’s reserves.
Both the industry, research institutions and scientistic community should garner their resources to invest in alternative options of energy.
Prime Minister Manmohan Singh indeed had a point when he said that high subsidies on oil cannot continue. The prospect of oil moving to $200 is more frightening than the recent hikes in petrol and diesel prices announced by the government.
No comments:
Post a Comment