Friends,
The govt. has bitten the bullet and have raised the petrol prices by Rs5/- per litre and diesel prices by Rs3/- per litre. The LPG gas price for the domestic use cylinder has been raised by Rs 50/- per cylinder. There are some reductions in excise duty and custom duties for petrol and diesel and crude oil. The duty on petrol and diesel is now 2.5% against 7.5% and the custom duty on oil import is down to zero agaist 5%. In the mean time the Internation crude oil prices are down to $12/bbl.
The pojected under-recovery for FY09 was estimated at Rs 2.45 lac crs. This bail out package works out as under:
Price hike takes care of Rs21K crs,
Duty cuts take care of Rs 22 K crs,
Upstream assostance from ONGC/OIL Rs 45 K crs,
OMCs absorb Rs 20 K crs,
Oild Binds will take care of Rs95 K crs ,
The balance Rs 42 K crs have been left uncovered.
I am happy that he govt. has worked on the suggested lines in these columns but has not taken care of the policy formulation in this regard. The impact of this excercise will not be bad whatever be the stance taken by the market people.I also don’t think that the Congress will have any unpopularity on this score for every body understands the economic imperatives. Congress has lost more ground due to eskewed mannerism which is not likable by any body.
I may tell that Indian economy as represented by Sensex has always shown positive moves in line with the surge in oil prices. In the year 2000 oil was selling for under GBP 20/bbl and the Nifty used to be around 1100 pts and now when the oil is selling for GBP 50/bbl the Nifty has had a closing of 4670 pts. In terms of Indian oil basket this holds true. Indian oil basket was $27 in 2002 (nifty 1000),in 2003 $28 (nifty 2000), in 2004 $40 (nifty 2500), in 2005 $55 (nifty 3500), in 2006 $63 (nifty 4000) , in 2007 $79 ( nifty 4500) and 2008 $127 (nifty in Jan 6300 and now 4700).
Do you also see some corelation ? In fact this is only natural for we are still not that automated economy and the developed nation suffer more for the oil rise than we do. I have explained this phenomenon even earlier in these columns. So fear not for the petrol price rise and faith that the valueations are just right , even on the lower side of the right valueations.
HariOm,
krsnaKhandelwal
