After much vacillation and prevarication, the government has finally done the inevitable, to raise the price of petroleum products by doing a little of everything.
But the most important is that even after the cut in customs tax, reduction in excise duty, a 'modest' increase in the cost of petrol, diesel and gas for all and a further request to states to slash their taxes, the oil companies are still left with massive deficits in every liter or every cylinder sold.
Let us be clear; the cost of oil in the international market is expected not to decrease, but to increase further. The predictions are that it will reach US $200 a barrel at the end of year; it is already up 1000 times since a decade ago.
There are many reasons for this. First, the world is learning that it has to 'share' the resources of the planet with the newer economies China and India. Their demand is increasing, as it must, the supply is not increasing, as it cannot. It is now more or less clear that the world is nearing the end of the age of hydrocarbons.
The only hope is in the newer technologies for oil exploration, which will help the world go where it has never gone before. One thing is clear: it is the end of easy and cheap oil. Measures like sticking a band-aid will not work in this scenario; our actions to increase a little price or cut more taxes are futile. We need a strategy to cut our demand, by either increasing fuel efficiency of every drop of oil or by substituting oil with other renewable products.
Take the price of Liquid Petroleum Gas (LPG). The government has taken a step to increase its price. The fact is that LPG has been promoted always by providing a subsidy on the cost of the gas or the cylinder. The only problem today is that many of us using the gas.
In other words, till only the rich used it, subsidy was all right, but now that more have become rich or the gas has reached the poor, the government can't afford the bill. But the rich community will continue to be using subsidised gas in the name of the poor.