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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Diesel- a major reform

Posted by Muthu on October 19, 2014

You would have heard the news about deregulation of diesel prices.

This is a major and significant reform by the government.

NDA government under Vajpayee de-regulated the fuel prices to market mechanism.

UPA slowly brought it back, more so due to rising oil prices in the last decade.

Petrol price was again completely deregulated in 2010 and every month price went up or down marginally depending upon the international prices.

Despite rising oil prices, since 2010, UPA government stuck to its decision of market controlled petrol prices.

UPA found it politically suicidal to deregulate diesel prices at one go and hence was raising it at Rs.0.50 per month.

After this steady incremental rise for 19 months, there is no longer any subsidy left on diesel.

This is also supported by falling global crude prices for last few months.

In fact, yesterday is the first time in last 5 years, diesel prices have been reduced.

The present government has timed this bold reform of diesel price deregulation very well.

This would ensure that the subsidy burden comes down significantly and fiscal deficit road map is achieved.

Given the current fuel prices, inflation is expected to fall down further in the next couple of months.

As there is no longer any subsidy left on both petrol and diesel, we can expect private players also to set up and operate retail fuel outlets (‘petrol bunks’).

Given the strong leadership and majority, I hope that this government won’t go back on this reform even if there is a strong rise again in international crude prices.

Let us hope for the best.

For now, this is a great bold move which is very good for the financial health of the country.

One Response to “Diesel- a major reform”

  1. ltinvestment said

    India Gov took bold step on fuel Deregulation. We are really in advanced compare to developed counutry.

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