Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Time to decontrol diesel prices?
Thu, 14 Jun Pre-Open

Ever since petrol prices saw the highest ever hike, the future of diesel prices has been on everyone's minds. The country's fiscal deficit is assuming wider proportions on account of fuel subsidies. In such a scenario, raising the prices of petrol (that is used to just a quarter of diesel) and leaving diesel untouched makes little sense. It is true that deregulation of diesel is a hard bullet to bite. More of a common man's fuel, if its prices are increased, it will have a wider impact on inflation levels. While the Government has suggested raising duties on diesel cars, it will hardly be enough to plug the deficit.

So what could be a possible solution? As per Finance Ministry's Chief Economic Adviser Mr. Basu, the best solution under current circumstances will be a partial and controlled deregulation of diesel. On the surface, the suggestion makes sense. This is because holding prices constant will lead to higher subsidies and fiscal deficit. This will lead to further currency depreciation and an indirect rise in costs. The Government will have to finally balance the situation by raising taxes. So why not nip the problem right in the bud by decontrolling diesel prices? But we all know that this is much easier said than done.

The hike in diesel prices will affect a wider chunk of the population, especially aam junta. It needs a very strong political will to go against majority wishes. Add to that the inflation risk. What Government should do is to rationalize taxes, which will solve half of the problem. The other issue is to make sure that the subsidies on diesel flow to the target beneficiaries and people with diesel run SUVs don't make a mockery of the subsidy system. Last but not the least; we do need to link diesel prices to crude prices to some extent. This will lead to people optimizing the use of diesel by giving them the signal that it's just like any other commodity following principles of demand and supply with price playing an important role. As crude prices have softened after a long time, perhaps this is the time for the Government to act. Hope it doesn't miss the opportunity.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Time to decontrol diesel prices?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.