For a Change Left is Right

Global oil price rise has lead to oil marketing companies seeking an increase in oil prices of Petrol, Diesel, Kerosene and LPG and the Government of India has obliged them. Petrol prices have been increased by 10% and similar price hikes have been done across the spectrum.

The Left Parties have been vociferous in terming this price hike as a loot of the common man. Are they right when they make this accusations.

Let us remove the wheat from the chaff.

India imports 70% of its oil requirement. 30% of the demand is met locally.

But you will be surprised to know that ONGC sells the 30% of the local crude to the oil marketing companies at International Rates. Thus we are paying ourselves a higher price for buying oil from ourselves for ourselves. Does that make any sense to you? If it does not, it does not make any sense to the Left Parties too. When ONGC charges the full international price, it makes insane profit at your expense and later on pays the profit to the government as dividend. But in the process ONGC gets access to funds that do not rightfully belong to it in the first place. It has the liberty to spend these funds as it wishes as these are its profits.

Secondly, Petrol costs 20.16 at the refinery gate, oil marketing companies, dealer profits, taxes, duties and commission add another 25.36 to it before it is sold to consumers at 45.52. (Source Hindustan Times, Business Pages 5th June 2008).

Can someone explain how the oil companies are losing money when the cost of Petrol to them is just 20.16 at refinery gate?

If all the taxes and duties were to be removed from Petrol, it would become available at let's say 27 rupees per liter.

If Petrol was available at such a price you can imagine the boost the economy will get. In effect when oil prices rise, economies suffer leading to lower tax collection and lower living standards.

For the government it is a catch22 situation. And for the moment I firmly believe that the Left is Right unless someone can show me otherwise.