The Indian rupee is now the worst performing Asian currency. It has slid more than 5% against the dollar this year and as per experts the slide will continue. Yesterday the rupee has touched 56 ($1 = Rs. 56), which is a first.
Reasons being cited for the rupee’s fall are euro zone crisis, widening current account deficit and of course the lack of reforms. Inflation isn’t coming down and as for governance, it is as if there is a vacuum up there, except for yesterday. Indian government raised the price of petrol by Rs. 7.5 (US$0.13), or roughly 10%.
The reason for this drastic move is the fall of rupee and the mounting losses of the oil companies, which are bleeding every day. As per the calculations, the oil companies are bleeding Rs. 21 crore rupees every hour because of oil subsidies.
Oil subsidies include petrol, diesel, kerosene and LPG. Together they cost Rs. 138, 541 crores in subsidies from the government. 58% of the total subsidy losses came from diesel for the fiscal year 2011-12.
But if he didn’t have to subsidise the OMCs, he could have brought down the fiscal deficit by an equal amount and his fiscal deficit would be just around 3.75 percent, not 5.1 percent. The markets would be salivating at this turnaround, and foreign money would be flooding in.
This petrol price isn’t necessarily a reform. It’s a mere hike. If there is a hike in diesel price (which is being contemplated to be raised by Rs.5 per liter) then that would be when the real dissent comes in. It’s not that we don’t have any dissent right now. Our resident-dissident Mamatha Banarjee has already weighed in. BJP which, never takes an opportunity, is weighing in meekly. Everyone else took to the punching bag Twitter.
The anger on Twitter was more towards why diesel was left alone, than why the petrol price was raised. Many found solace in humor by joking about how there will be loans for petrol and how they will torch their vehicles with their last drops of petrol.
With yesterday’s hike, Hyderabad (Rs. 80.58 per liter) is the most expensive city for filling up the tank followed by Bangalore (Rs. 80.51 per liter). In the metros Delhi has the cheapest rate at Rs. 73.14 per liter. Goa’s Panjim enjoys a bargain Rs. 62.4 per liter. This is because of a bold move taken by Goa’s Chief Minister to the cut the price.
I have just checked the news and nothing drastic happened in the last 10 hours since the hike, which means we will continue to live with this price hike. The burning question right now on everybody’s mind is, will the government go for Diesel and the cooking gas? Diesel price in Bangalore is hovering around Rs. 46 per liter and with yesterday’s hike for petrol, the difference between these two fuel categories now stands at a staggering Rs. 34 per liter.
Last quarter ,for the first time, diesel car sales surpassed petrol car sales. The main reason driving this surge is the obvious price differential. However, cars aren’t the biggest consumers. It’s the trucks which are the biggest consumers of diesel. Also they are the vehicles which transport everyday goods and vegetables from one place to another. Hitting on diesel is directly hitting on inflation. Most importantly, it is hitting just about everybody. Is the government ready for it?
PS: The air is still free by the way.