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