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Journalism of Courage
With the price of international crude surging over the past two months, it was to be expected this would have to be reflected in the domestic area in the near future. After all, with Brent prices pushing close to 30 per barrel due to a number of reasons 8212; the re-stocking of the US strategic petroleum reserves, the Nigerian oil strike, delay in the reconstruction of the Iraqi oil sector and increased seasonal demand in the US, the world8217;s largest oil consuming market 8212; a domestic price hike has been in the offing since July.
That it took the government two months instead of the fortnightly review to reflect the price increase was, without doubt, due to political considerations, given that Parliament was in session. With assembly polls just a few months away, why did the government decide to not only hike auto fuel prices, but to increase prices by a substantial amount? The almost overnight announcement of a hike of Rs 2.28 per litre for petrol and Rs 1.49 per litre for diesel has, in fact, taken many by surprise. The obvious reason is that the oil companies have made it clear that they are no longer able to overlook the adverse impact of the delay in the price hike on their bottomlines. While low global crude prices in the immediate aftermath of the Iraq war had allowed the national oil firms to make huge profits, the increasing subsidy burden they were made to bear had seen their overall profit margins come down. Now, with the spurt in international crude prices, they are no longer able, or willing, to bear the subsidy burden imposed on them. Also, with the assembly polls still some time away, the government obviously feels that they can chance a substantial increase in the prices of petrol and diesel 8212; though not the more politically sensitive LPG and kerosene 8212; at this juncture rather than closer to elections. If, at that point of time, global oil prices continue to climb, domestic price hikes can be staved off by cuts in excise duty or by more modest hikes.
