It is rare that any political leader in India speaks about the realities of fuel pricing in the country. At last Prime Minister Manmohan Singh has spoken up and said that underpricing petroleum products creates problems and subsidies are no solution.
In this context, he said, while returning from Maldives: “...further subsidies can only aggravate the budgetary problem, and if the budgetary problem gets aggravated, inflation will again raise its ugly head.”
This is as clear a statement of the issue as one can get. Hopefully, this will encourage the oil marketing companies to gain some courage while pricing various fuels instead of looking over their shoulders and fearing the political repercussions of taking the right steps.
The test of sticking to good economics will come when fuel prices have to be raised next. Hopefully, at that time, Singh will remember these words of wisdom.