The astronomical increase in prices of petroleum products esp. petrol is looming large since last week. The Congress led UPA government at the centre has been in a quandary over the timing of the price increase. It didn't dare to do so till Karnataka elections were over, and now it doesn't have any other option but to go ahead and review the petro prices as the losses of oil companies mount. The funny thing is that the congress has already lost Karnataka, and it's highly prone to face the voters' wrath in the coming general elections.
We must anticipate the fact that the international crude oil prices have crossed $132 per barrel and might well touch $150 a barrel in the coming months, the most intriguing thing is the politicisation of the issue. The oil companies have suffered almost 200000 crore loss (There were quite a few raised eyebrows when the loan taken by Maharashtra Govt crossed Rs. 100000 crore last year) only because the govt's insistence on keeping the petroleum prices under control.
The government should get rid of most part of subsidies in a phased manner. It could always start with petrol, which hardly affects inflation as most of the transport vehicles are run on diesel. It could easily fix the petrol prices as 'Mark to Market'.
Instead the govt. uses other easier options like issuing oil bonds. It's very unfair on part of govt. to pass the burden on future governments.
The other thing that I fail to understand is the heavy advertising by the public sector oil companies. These companies spend crores of rupees daily just to sell their branded products like extra premiums and speed and turbojet diesel. The companies often tie up with banks and credit card companies to push their sell. The need of the hour is certainly not to encourage the sale of petroleum products.
There is hardly any significant competition to these public sector companies. So instead of wasting the money on advertising, they could use it to subsidize the products in rural areas.
It's time for the govt. take bold decisions and phase out all the subsidies on petroleum products including cooking gas and kerosene irrespective of the political compulsions.