Using the low global crude oil prices as a window of opportunity, the government should have decontrolled petrol and diesel prices much earlier, said the pre-Budget annual Economic Survey terming the government?s handling of the oil price hike situation as ?imperfect?.
Reformist in its tone, the Survey has its message loud and clear: ?Decontrol petrol and diesel prices at the earliest.? Additionally, it has suggested that the government should develop and ready a policy response system and financial buffer for use during eventuality when diesel prices rise above the oil equivalent price of $80 a barrel.
?Global prices declined rapidly after July 2008 to around $40 per barrel. This was expected to be a temporary respite with the oil prices likely to rise along with a recovering global economy… it was clear that the respite would be temporary and that this provided a golden opportunity to reform the pricing and control system. It was therefore imperative that petrol and diesel prices be decontrolled,? said the Survey. As the low prices of oil has provided a temporary window for costless decontrol of petrol and diesel, this window must be utilised at the earliest, it added a day after the government announced an ad-hoc hike in petrol price by Rs 4 per litre and diesel by Rs 2 per litre.
The crude oil price has doubled since last December to touch $70 a barrel in July and had the increase been factored into the price without cushion, petrol price would have gone up by Rs 5.82 a litre while diesel rates would have gone up by Rs 3.62 per litre. The Survey also recommended an ambitious rationing of LPG cylinders and phasing out of kerosene supply subsidy. ?Limit LPG subsidy to a maximum of 6-8 cylinders per annum per household. Phase out kerosene supply-subsidy by ensuring that every rural household (without electricity and LPG connection) has a solar cooker and solar lantern,? the Survey suggested.
The Survey has also envisaged private sector?s entry into the coal sector for the development of the power sector. ?As long as the coal sector remains a public sector ?monopoly?, it could remain a bottle neck for accelerated development of the power sector,? the Survey said.