Every few months, the Central government makes news. It raises the price of petrol, diesel or such incendiary element. Some stones are thrown, some bones broken, and the country returns to normal in a day or two. Maybe the minister of petroleum enjoys the experience. He does not get many chances to make headlines, so he takes the opportunity whenever he gets it. One would have thought that he would want to avoid unpopularity. That much is obvious, for announcements of oil price increase are few and far between; if the minister really enjoyed them, he would make them every day. That might be too much; daily price increases may send the prices sky high. But he does not have to be a monotonous price raiser; he can reduce the prices too once in a while. That would make him popular. And so the show would go on.
But getting into the headlines cannot be the sole reason for raising prices. They are raised because crude prices go up, and the government’s refineries would start making losses if product prices were not raised in tandem. The companies understand it too well, and would raise prices on their own if the minister would let them. Soon the public would see the relationship between crude and product prices. The two would follow each other like the sun and the stars, and people would stop noticing them, just as they do other prices. Prices are going up and down all the time — mostly up in India — and people take inflation as an unfortunate fact of life they have to bear as Indians. Oil prices would melt into the sea of inflation.
There is another reason why the minister should leave it to the oil companies to announce price changes. The balance of payments is in deficit. There is no one in Delhi to bother about it; the Reserve Bank is worried that the deficit may spin out of control. So it does the only thing it can: it keeps depreciating the rupee. Chronic depreciation is going to increase the frequency of increases in oil prices. The minister cannot keep calling the press every week or day; he might as well let the oil companies make the frequent announcements. They do not even have to make announcements; they can simply raise pump prices from time to time, which is how oil companies in industrial countries do it. While the minister is making up his mind to shut up, he should also consider taking the burden of the kerosene subsidy off the oil refiners. For that he would need the cooperation of the finance minister, who will have to take it into the budget. But if he does so, Reliance will begin to sell its products in India. That will bring in some competition — which is probably why he is not doing it.