Friday, 4 November, 2011

Petrol Price Hike - The Macro Picture

Petrol Price Hike - The Macro Picture

The price petrol of petrol has gone up by a couple of rupees per litre. And as usual, the Tamasha has started.

  • All political parties, including the Congress, are criticising the decision and want a "roll-back".
  • The Finance Minister claims (and so do the the Oil Marketing Companies) that petrol prices have been deregulated and hence the Government can do nothing about it.
  • Will someone care to explain the reasons as to why the price per litre of petrol is virtually identical in all petrol bunks, irrespective of whether you buy from Indian Oil or Bharat Petroleum or Hindustan Petroleum? The same person can also explain the rationale behind the petrol prices changing on precisely the same day, to the same extent.
  • If prices are truly deregulated, will not the consumers complain against cartelisation and won't the Competition Commission take appropriate action?
  • Virtually all the politicians, all newspapers and all TV Channels, "sympathise" with the "Aam Aadmi". According to publicly available statistics, India is a country where 35-40% of the population survive at less than a dollar per person per day (Rs. 50/= per day), with a further 40% (totalling virtually 80% of the overall population) survive at less than two dollars per person per day (Rs. 100/= per day). To the best of my limited knowledge, these people can't possibly be zipping by on a two-wheeler. They're more likely to be depending on public transport like buses and trains, which run don't run on petrol, and are subsidised in any case. My own guess is that these 80% of the Indian population can lay claim to membership of the Aam Aadmi club of India.
  • As per my comprehension of Economics and my knowledge of Pareto Principle, the balance 20% are pretty much likely to enjoy nothing less than 80% of the National Income. My school teacher who taught me Economics had told me that in any group of people those belonging to the top 20% in terms of income and wealth ought to be considered rich in that society. Unless they've changed the basic principles of Economics since my school days, the increase in petrol prices in India impacts the rich people and only the rich people. Certainly, it does not impact the proverbial "Aam Aadmi".
  • If anything, those riding two-wheelers can complain against the richest class belonging to the top 1-2% of the Indian Population - After all, the richest group of people drive around in fancy cars which are powered by diesel, which continues to enjoy a huge subsidy.

Hence, folks, don't be perturbed by all the hullabaloo over the hike in petrol prices. We need to wake up and behave like responsible citizens, and should not eat away the scarce resources which can very well go to give a slightly higher subsidy to people like poor farmers living below the poverty line, who are committing suicides at the rate of around 15000 persons per annum. Think about it!



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