Ad Here  
Noble nonagenarians... Lalu’s envy, India’s pride A think tank for Chennai A rich pool of talent not utilised…. Reliance’s TV – 18 ready to launch Tamil News Channel Diamond jubilee of Egmore Samskrt School Build close rapport with business leaders Mersal magnified Shale gas and its shallow future Solar thermal shines… Welcome changes that testify to Jayalalithaa’s return to health Tough task taking states together Roaring Ro-Ro facility When nations steal growth from one another… Another Indian music maestro at the UN Dr C Rangarajan returns to Chennai Fall in crude prices help in oil sector reform PPP mode for upgrading Corporation Hospitals West Bengal: mindless malignancy Where is Rajaji? Parliament in paralysis... Mu Sigma – is no more Russi Mody – a tribute Poor quality of university VCs For whom the bell tolls? Telangana in top gear… Rs.1600 crore paper board plant of TNPL to the lack of interest on the part of these to focus on original research. This despite the much lower costs of such research in India. The industry which thrived on the protection of a closed economy and the advantage of a vast domestic market, has failed to organise its evolution on healthy lines No mega rail project for Tamil Nadu Align crops to agro climate endowments… R Sridhar steps down as CEO of Shriram Capital Naidu will soon build a new Hyderabad Inflation: are we emulating Argentina and Brazil? Modi and the lady The few handicaps... EEC at the National Media Centre Tatas moving out of urea production... EVM is tamper-proof The ‘Ayyo-yes’ is no more Kinetic Karnataka Adharma of opposition politics Come elections, come advertisements... When online building permits work…. When TN politicians can emulate Kerala's Secularism and anti-Hinduism Silver Years of Madras Musings Valli, they are more marginalised Infrastructure funding – lessons learnt No engine for this car CII projects higher growth… Fortune for Indian Airlines Like Hinduism: many paths to reach God... Tribute – UCAL Selvan… Remembering Indira Sivasailam... More Shakti to resource mobilisation... Multi-faceted Venkat Why this malaise in medical education? He continues the focus on social amelioration Pharma – overdose of copying He saved millions from starvation... Paytm karo... Robber barons everywhere Modi storms Silicon Valley Convulsions in The Hindu Vibrant Gujarat Tatas moving out of urea production... Quality silica from Neyveli A friendly business group Land reclamation from sea appears cheaper! Varuna (rain) in 2015; Vaayu (air) in 2016. Chennai devastated The Swadeshi Trump An informal presentation - analytical, forward locking... Preserving for the future Streamlining mandatory third party cover A Grand Finale for SN’s MS centenary at the US… CIPET hqrs to stay at Guindy – for the present? Sweet news for TN sugar mills How Air-India loses customs... More heat than light The power-full Hindujas Revive development banks... Auto components surge… GM Technology at last! Godspeed, Chief Minister JJ Excel Generators provide the vital back-up Focus on quality of power - its only around 170-180V The rise and fall of Annamalai University A more liberated TN… Haul over the coal Where a state respects its litterateurs… Moily’s bold thrust Nuclear power at the nucleus Colour-Chem’s colourful KRVS IAS invades NDDB... Tribute – M V Murugappan A Grand Finale for SN’s MS centenary at the US… Limit foreign borrowings to hi-tech, export potential projects... Quality education through the PPP mode Insurance companies bleeding, yet no decision on increasing FDI limit! The rise and rise of KCP All eyes on Sankara Nethralaya Scientists urged to take up farmer-oriented research Maximising the micro pricing … The brown list of Venkitaramanan Cutting the nose to spite the face An enemy’s enemy is a friend PC’s preference for professionals Gas is the way forward L&T: focus on infrastructure and more infrastructure… The Gulf aviation boom When small is no larger beautiful.. Intellectual of rare qualities TGS- The king storyteller A welcome initiative by the judiciary Five star activism stalls development activity Adapt Vajpayee dinner diplomacy A professional at the helm of IRDA... Whistle-Stop Tour of Raghuram Rajan Why land prices zoom in TN? An inexplicable neglect A C Muthiah – his munificent bequeaths to science TN – agglomerate land holdings without alienating ownership Making ‘my Amaravati’... Welcome thrust on trade in Modi’s foreign visits... Shaming of Tamils by Tamil farmers at Delhi Sweeter prospects for sugar Kudos to NDTV... Measuring roof tops in terms of KW/MW CSR and CMI: promise of another Srinivasan Ramanujan... The why of tax incentives L&T- the specialty of special purpose vehicles S Ramanathan – a versatile musician, musicologist Tribute – Manikam Ramaswami Music happens Delhi returns to BJP Discoms deserve better… IPL - no surprise this scam TN-leverage strength of BHEL, NLC... Increasing non co-operation of state leaders CRS, a jewel among managers, is no more. Contrarian cousins Cement prices continue to rise… Padma Bhushan for A Ramakrishna More Shakthi to Das’ elbow Shanti and Sadhana through Music Return to king coal for urea... Building loyalty through the stomach Rahman at CIC Shipping woes of Chennai companies WTO Meet: resolved to meet again Poor representation for Kerala and TN in Cabinet The balancing act Marketing expert Balagopal is no more Odisha: spectacular win by Naveen Patnaik This scant respect for Law Waning interest in public discussions… Bihar – Nitish Kumar adopts the Lalu model S V Raju – a ‘good’ true liberal Revving up the manufacturing sector Editor's Says The star of Spencers is no more B H Kothari - a tribute Towards speedy justice Chennai and Kolkata miss opportunity to grow as Delhi and Mumbai MHC should not return to its old indisciplined ways Welcome focus on core competence Demise of a media baron... A yen for wastage… No Maha Koottani in TN... Lesson from Chandrababu Naidu TELANGANA at last…BUT Muffled voices for merit… Solar, solar everywhere … F C Kohli - his concerns all embracing New IT products of Ramco in the pipeline… Recognition to role of NBFCs.... Polls and promises Liberal imports idling indigenous capacities Engineering seats go abegging The nuclear option Should we change the official year? Tribute A proud Madrasi Funding the un-funded Cleaning Ganga – relocate tanneries and install electric crematoria Fortune 500 review TN accounts for the largest recruits by the IT sector Kulandai was a giant There was flood of milk. Reason: no milk commissioner! Eternal support for capitalisation of PS banks Medical costs hit the roof... Online not in line with brick and mortar businesses... The Ports’ Pasha expands into Tamil Nadu Delhi is distant… Boy, can you beat these? ONGC at KG Basin Gay abandon in pricing The sea- saw battle continues... Computation of GDP – conundrums continue Air Asia India will set new benchmarks for budget travel More tributes to GR When Ratan Tata visited SRM Make standards certification mandatory... Protest masters... Bihar elections - the Rajaji formula worked For whom the MIDS bell tolls? Small units prefers to remain small... Banning booze... Tihar, Puzhal not different from Parappana Agrahara Which side are you, Montek? Airlines in India: cost and space Wanted: a second airport for Chennai Welcome GST Delhi is distant When the President was rendered homeless… Tax agriculture Of course, Gujarat is vibrant Road development slows down Alexa – Talking Wikipedia The Jan Dhan bonanza Fuel for thought London, London Narayan Naidu’s return augurs well for Seemandhra A glass full of corruption Don’t seem to feel the pulse… TIAM turns a full cycle Strengthen the base... …and of a popular trade leader Editor's Notes Breaththrough in malaria control Put expensive assets created to use... Plummeting profits of PSBs China invests in India Delhi Chalo... Permanent secretariat for TN GIM Sri Lanka votes for change The ‘Jayanthi Tax.’ Things happen by accident and not by design... IPL type auction for VCs? SoA @ 80 Readers' Mail Wise Presidents Not just in-laws (and outlaws); they’ve renowned academics at the helm! GNS - 100: our first subscriber
Fuel for thought

I find an interesting contrast. The average American adjusts with ease and equanimity to wild fluctuations in the price of gasoline. The average Indian finds it difficult.

Petrol prices in the US have always been lower than most countries in Asia and Europe. When crude prices shot up a few years ago to more than $ 4 per American gallon (3.75 litres), there was a lot of grumbling, but there was also resignation to the fact that prices were market driven.  So people adjusted their lifestyles – they moved away from larger sports utility vehicles (SUVs) to smaller cars; hybrid cars saw massive increase in sales, people cut back on driving vacations, etc.

Since 2014, when crude prices crashed, petrol prices dropped to as low as $ 1.35 per gallon; with exchange rate of Rs 68 per US dollar. This meant that petrol was available for just around Rs 25 per litre through 2014 and 2015. People went back to buying larger vehicles, and hybrid sales growth slowed. In my current visit to the US, I notice the price shooting up to $ 2.75 per gallon. This translates to Rs 49 per litre! The average American has taken this doubling of price in a year in his stride.

In India the contrast was stark. Successive governments at the Centre have been struggling to cope with the huge increase in crude prices. The Vajpayee government attempted to move away from the administered price for petroleum products in 2002. The then Petroleum Minister, Ram Naik, told journalists at the Economic Editors Conference that the regime of controls would be over. On that promise, Reliance Industries, Essar, Shell and ONGC entered petroleum marketing through hundreds of retail outlets. The three private companies also set up a good number of petrol/diesel dispensing stations across the country. These, in fact, were different from the dilapidated and often depressing outlets of the public sector oil marketing companies of Indian Oil, Hindustan Petroleum and Bharat Petroleum. In fact, the glittering and clean appearances of the new entrants triggered the change on the part of public sector outlets as well.

The frequent and significant increase in crude prices, along with the resistance on the part of average consumers, continued to challenge government’s attempts to rationalise pricing. Thus, successive governments, including the NDA and UPA found it extremely hard to adjust petrol and diesel prices to cost. Along with LPG prices, diesel and kerosene prices were kept under control. Only the price of petrol was deregulated and this resulted in petrol prices shooting up to around Rs 78 per litre in retail.

The Modi government was incredibly lucky in crude prices crashing to little over Rs 30 per barrel through 2014. This made it possible for the government to dispense with price control on diesel. It also took bold to dispense with the old system of huge subsidisation of LPG. The Aadhaar platform was used along with the Dhan platform to deliver subsidy directly to the beneficiary. In that process, the government was able to eliminate a large number of bogus claimants. And the appeal of the prime minister also helped to wean a good number of the haves away from the subsidy.

The government also adjusted the excise duty on diesel and petrol upwards to benefit out of the fall in crude prices. Thus the full effect of the decline in crude prices has not been transferred to the consumers. This was necessary to bolster up the revenues of the Central government at a time when industrial growth was sluggish and corresponding revenue growth was not to expectations.

When the price of crude increased from a low of around $ 30 to more than $ 50 per barrel, the retail prices of petrol and diesel inevitably increased. Oil marketing companies adjust these prices periodically, and the consumers and several state governments have been voicing their protest.

One is thus able to see the contrast – the ease with which the US has been able to adjust to variations in the price of crude and its absence in India. State governments that run a large fleet of public transport, find it difficult to increase fares in tandem with rise in the price of diesel. Thus, they protest vociferously over the continuous and sizeable increase in the price of diesel. It needs a lot more efforts to explain the why of these fluctuations. Unfortunately, policy makers in the centre are not quite capable of doing this.

Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236