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Hike in oil prices Sir, The unprecedented rise in international oil prices has all the potential to drail the economy of the country which has recently shown signs of growth and recovery. The oil pool deficit which is close to Rs 9000 crores from Rs 3000 crores in March 1999 could reach 15000 crores. Indian economy is specially vulnerable to the international price rise of oil owing to its controlled price regime for K Oil, diesel and LPG crude oil production in the country is only 30 percent and 70 percent of the requirement is imported. Now that the Petroleum Minister Mr Ramnaik after receiving the nod from the cabinet has hiked the oil prices. He has asserted that to reduce the burden on consumers a formula has been evolved. The formula is that one third of the hike in prices will be borne by the consumers, one third will be compensated by reducing the excise and import duties on crude oil imports and another one third will be adjusted by issuing bonds to the oil companies. Although under the given situation some relief has been given to the consumers but yet there are apprehensions of an impending economic showdown. One third increase to be borne by the consumers can unleash inflanationary forces with cascading effects. Another one third to be compensated by reducing excise and import duties shall cause the exchequer to suffer big losses. Issuing of bonds to oil companies means postponing the problem and not solving it. In totality, the oil price hike, whatsoever the ways of absorbing it, is to going to have an adverse effect on the economy. Agriculture sector is also to be hit due to rise in fertilizer production costs. Increase in prices of K Oil is going to effect the weaker sections of the society. Rupee value will further fall due to more demand for foreign exchange resulting in serious balance of payment problem. To make for the loss suffered by exchequer due to reduction in excise and import duties, Government shall borrow from the market. This can cause an increase in the interest rates thereby severely effecting the industrial growth as credit shall become more costlier. Under these circumstances, conservation of oil becomes more necessary. Some checks have to enforced on plying of private cars and two wheelers. Public transport system is to be made more efficient and readily available. Indigenous production needs to be given a boost by involving the private sector in exploration of gas and petroleum. Exploration of alternative measures of energy is also the need of hour. Yours etc.. |
