The government thinks it has mastered the vicissitudes of the oil market. It’s a predictable formula: Every six months or so, depending on the price of international oil, domestic prices are adjusted.
So, when the oil ministry announced a hike in petrol and diesel prices on Wednesday, it seemed like clockwork, given that the global crude oil price has been hovering around $70 (Rs3,367). In June 2008, when global crude was hitting record levels at around $140, prices were raised. When a drop in demand sent oil crashing to $30 in December, India lowered prices.
But in the time that it takes for the government to move to hiking or lowering prices, oil companies start showing red on their balance sheets, which then leads the government to resort to clever accounting tricks with off-balance sheet bonds.
There’s a better and easier way to deal with all of this—it’s called deregulation. As global oil starts yet another upswing, it’s time the government mastered the benefits of the free market.