As per the oil ministry, the county can no longer take up the subsidy provided to the oil companies and therefore, oil prices are deregulated and will be more market driven. Effect - end consumers will pay a lot more for oil, while the oil companies and the government will laugh their way to the bank.
While I am sure the subsidy given to the oil companies must definitely add up to become a burden for the government, but then the government also makes lot of money through the tax and cess on oil and oil products. And the most important question that comes to my mind is this - if the government could provide the subsidy when crude oil prices were at a historical high last year (around $147 per barrel), why can't the government provide the subsidy now that the prices are almost halved.
Most of you readers can infer that I am coming out with some conspiracy theory, but I for one believe deregulation of oil prices has a lot more to do with RIL's ability to keep up its fuel pumps business, then with subsidy. Because I remember that the government came out with oil bonds last year to support the PSUs during the high crude price period. And Mukesh Ambani had closed fuel retailing stations with the reason that Reliance could no longer operate with the regulated rates of Petrol and Diesel and that oil bonds were not allowed for private companies. With the regulated prices out of the way, oil companies will have to move prices as per the global rates. Effect, Reliance will offer nearly the same petrol and diesel rates as the PSUs and the common man will bear the brunt.
I am sure the government will definitely come out with a way to subsidize fuel for the voter class, or people in the lower-middle and lower class.
