With crude prices being benign, this is the best time to deregulate oil prices and link them with international prices. This will bring efficiency in the system with better utilization of scarce energy resources.

Oil price deregulation is definitely a positive development and augurs well for the Indian economy. It was a much-awaited reform, though implemented partially. It is clear that the intent is there to deregulate the sector, which is crucial. This will benefit the economy, as it will lead to efficient use of scarce energy resources in times of escalating crude prices. The problem with subsidy is that the general public does not bear the brunt of the rising prices, on account of which no appropriate steps are taken to curtail consumption and use energy resources efficiently.

Fuel price hike will be a negative in the short-term, resulting in higher inflation. As per our estimates, the impact of the hike in auto (petrol and diesel) and cooking (domestic LPG and kerosene) fuels will lead to inflation increasing by 0.63%. However, over the medium to long-term, positives from the price hike will be felt by the economy, as it will reduce the overall subsidy burden, in turn lowering the fiscal deficit and resulting in lower borrowings by the government to fund the subsidy.

The Analyst Magazine, Oil Deregulation, Indian Economy, Domestic LPG, Downstream Oil Companies, Domestic LPG Prices, Scarce Energy Resources, Crude Oil Prices, Petroleum Products, Gas Production, Indian Oil Industry, Sovereign Energy Fund.