Tuesday, July 01, 2008

as oil price explode across the world, as oil addicted america gasps at the price, in india the reaction is bizarre.

the government which faced 8% inflation before oil explosion and now faces 11% due to oil price mismanagement, keeps on churning chicken and egg stories.

2 articles in hindu explain the sad story of india's callous mismanagement. this mis management falls squarely at the hands of the foreign educated finance minister and the prime minister.

1. as oil prices soared, the government fiddled thinking it can still buy super high prices and sell low. this had a brutal effect on oil and marketing companies threatening to wipe out any cash they had.
2. as oil prices hit record high, the government instead of passing on the market price quickly kept subsidizing car owners with excise tax relief and low oil prices
3. as oil prices started going up from 100 to 110, india's finance minister unveiled a grand budget that had zero focus on public transportation.
4. as oil prices stand at record high, the government has zero clue on how to handle it.

and our policy is busy such that rich companies like reliance is prospering at the cost of public oil companies and the public.
What compounded the problem of the oil companies — Indian Oil, Hindustan Petroleum and Bharat Petroleum — was the EOU (export oriented unit) status granted to the 33-million-tonne refinery of Reliance Industries in Jamnagar by the government in April 2007. What this seemingly harmless development did was to take away more than 11 million tonnes of diesel from the domestic market for supplies abroad.

This forced the public sector oil companies to import diesel to compensate for the loss of volumes from Reliance. In 2007-08, the oil companies imported 2.93 million tonnes of diesel at international market prices, while Reliance exported 11.46 million tonnes at the same international prices. This has led to heartburn for the oil companies — while they were making losses buying diesel abroad at market prices and selling below that, Reliance was able to export its own production at premium prices.

the government ought to have asked tough questions.
1. why does a car owner need low prices
2. why does more than 1 car owner families not pay 10 to 20% more than international prices
3. why does public transport be neglected and abused
4. why does government maintain huge fleet of cars and oil guzzling vehicles
5. why does not government bring parity quickly to international prices so that rich consumers who guzzle most of the oil can pay correct price
6. why socialism being practiced in the brutal oil area?
7. why does not government promote aggressive policies for urban transportation in the lines of singapore and london rather than being the poster child of car industry?

the end result? as public oil companies gasp for breath, the chain right from them to end consumer is slammed. and the government goes on to talk fake development at every turn ignoring vital economic management.


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