There’s been a flare-up in the politics of automotive oil pricing of late. The Bharat Bandh called by opposition parties last Monday was to protest record retail prices of diesel and petrol. But policymakers in charge need to stay the course, for now.
It makes perfect macroeconomic sense to pass on rising global crude oil prices to consumers, and duly revise retail prices of the main petroleum products against the backdrop of a weaker rupee vis-à-vis the strengthening dollar.
True, the structure and quantum of consumption taxes in retail prices of petrol and diesel need reform. Yet, the fact is that overall consumer price inflation remains moderate, and in such a scenario, hardening retail prices of petro-products would actually lead to fiscal prudence and arrest runaway demand for oil. Read more
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