Dip in rupee's value behind petrol price hike

It is not a pleasing sight to see motorists in Bangalore, Hyderabad and Punjab buying some of the costliest petrol in the world. They now shell out Rs 81.75, 81.44 and 81.36, respectively, for a litre of petrol. If we calculate the price of high octane petrol in these cities, it is hovering around the Rs 88 per litre mark; it is second only to the London market, where the same petrol is available at 136.03 p (~Rs 118.3) for a litre. The current hike is the result of a depreciating RUPEE, hefty state taxes and the messed up oil marketing companies (OMCs). The national currency, which has already breached Rs 56 to the dollar, forced the OMCs to finally announce the increase in prices. What hurts most is the steep increase of Rs 6.58 (sans local taxes) for petrol, which has never happened in history.

Politics in our country does not allow state-owned oil companies to run on isolated economic terms, although some voices from the primary ruling Congress party are backing the price hike and passing the buck to the PSUs. If they want us to believe that the OMCs have taken this decision on their own, without any clearance from their political masters, then we are living in some other world. It cannot be a co-incidence that prices were increased on the last day of the Parliament session, where the ruling collation got a beating from the opposition on issues such as corruption. The last correction in petrol prices happened in December last year, when prices were decreased by Rs 1.22. The decrease came ahead of elections in several key states such as Punjab, Uttarakhand and Uttar Pradesh. It was subsequently followed by the Budget session of Parliament. Though the companies were making a hue and cry about the losses they were incurring, the political masters did not allow the increase in petrol prices.

The reason for the present increase cannot be an escalation in international crude oil prices, as prices at Brent scale mellowed to $106/barrel from around $120 earlier this year. It is only the dip in the rupee's value . Some have argued that if these OMCs were truly set free to make business decisions, it would not only be better for the country, but would also be a welcome step for these companies.