Quick Edit | Time to free oil prices

Quick Edit | Time to free oil prices

The verdict is clear. The Kirit Parikh panel on fuel pricing has recommended total deregulation of petrol and diesel pricing. Where outright ending of controlled pricing is not possible (as in the case of kerosene and liquefied petroleum gas) substantial increases have been proposed.

It is important that the Union government accept the panel’s recommendations and end the back-door regulation of fuel prices.

The administered price mechanism supposedly ended years ago. In reality, pricing decisions are made by the government. This must end if price distortions in the economy and the slow death of oil marketing firms are to be stopped. These companies are bleeding money: by one estimate they will lose Rs40,000 crore in fiscal 2010 due to under- recoveries. These are good reasons to end this unsound practice.

Political considerations may, however, result in the dilution of these recommendations. That will be another form of control. The panel has called for deregulation and not some politically palatable formula of price control.