A 30% rise in cooking gas, 25% rise in gasoline ready to send shock waves through the Indian middle class economy
Harry Patil
May 26, 2008

Indian Government is finally giving up on subsidizing energy for one billion native Indians. A 30% rise in cooking gas, 25% rise in gasoline ready to send shock waves through the Indian middle class economy. State-run oil marketing companies on Monday raised the security deposit for new cooking gas (LPG) connections to Rs 1,250 from the existing Rs 850 per cylinder.

India is finally thinking right. It is moving ahead to decontrol the price of gasoline. It is a move that may see rates being hiked by Rs 16-17 a liter or $1.70 per gallon. If India and china had made such moves three years back, Crude oil would have traded below $50 a barrel now. India still plans to continue diesel to be sold at a subsidized price by the state owned and run oil and gas companies.

Petrol in India is currently being sold at a loss of Rs 16.34 a liter and diesel at Rs 23.49 per liter. Eventually India will be forced to deregulate both. That will send sho9ck waves through the Indian middle class economy.

Indian Petroleum Ministry is having an internal tug of war with Finance Ministry. Indian Finance Minister Chidambaram finally understands his mistake that will make history in the world. It is too late now.

Indian Petroleum Ministry is considering the move after Finance Ministry declined Petroleum Ministry's request for lowering customs duty on crude oil to zero from 5 per cent and that on petrol and diesel to 2.5 per cent from current 7.5 per cent.

Deregulation of gasoline will cause Indian inflation to rise by 8%. Deregulation of diesel will increase Indian inflation by 12%. The hyperinflation in food and energy is a reality in India today. The fault however lies to little educated and prudent Indian politicians that did nothing to move into alternative fuels.

Look at Brazil. Like India it has large sugar cane plantation. It converted its sugar into ethanol and reached energy independence. Today Brazil is major energy exporter instead of major energy importer.

A 30% rise in cooking gas, 25% rise in gasoline ready to send shock waves through the Indian middle class economy
Harry Patil
%. The hyperinflation in food and energy is a reality in India today. The fault however lies to little educated and prudent Indian politicians that did nothing to move into alternative fuels.
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