Petrol and diesel now dearer by Rs 3.50 and 2.00 respectively

Need not be the case. The rise is good after all.

Finally, the Indian government has taken a good move by de-regulating (removing subsidy) fuel prices terming it as the “only prudent” way to supplement the growing economy. The Government also claims that the move will not affect the sales of automobiles in India. Going ahead with this move, the Government will save as much as Rs 1000 crore a day, say analysts. The de-regulation also means that fuel prices will fluctuate depending on the price of crude oil globally. Another positive from this move will be the resurgence of Private sector fuel stations like Shell, Essar and Reliance who found it difficult to compete against government aided competitors.

Prices of petrol have gone up by Rs 3.5 while Diesel is now dearer by Rs 2 per litre. Although the government has not fully de-regulated the price of diesel (meaning another rise is imminent), the price of petrol is fully free from subsidy. However, the price of petrol if the Government taxes were NIL would be Rs 30 as against Rs 55 today. The rise in prices will also encourage people to drive more efficiently and switch off their vehicles in signals.

Society of Indian Automobile Manufacturers (SIAM) President Pawan Goenka said -

“This decision to link fuel prices to market prices is the only prudent approach for a rapidly growing economy like India,”

Hit the jump to read what the industry feels about the rise in fuel prices.

Quotes from ET

However, in contrast, immediately after the price hike was announced, SIAM Senior Director Sugato Sen had said that sales will be affected in the near future.  “

It (price hike) will have a negative impact on sales in the short-term,” Sen had said.

Maruti Suzuki India Chairman R C Bhargava said that across the world, a free pricing policy prevails, but industry still progresses.

“This is a good and sound step by the government,” he said. He also added that “In the short-term, sales of small cars may jump more, while big cars may witness a slowdown in sales.”  “The auto industry will maintain its growth momentum.” “Petrol once used to cost Rs 2-3 (per litre) and still sales of cars were minimal… while with prices hovering around Rs 50 (per litre), sales have jumped to their highest levels. Even if prices increase, industry will continue to grow,”

General Motors India Vice-President P Balendran said that prices were bound to rise and freeing fuel prices was inevitable.

“No doubt, the industry will be affected in the short-term, but in the long run, we will be able to absorb,”