Expert views - Government allows state oil firms to raise diesel prices

MUMBAI Thu Jan 17, 2013 2:27pm IST

A worker switches on a fuel pump before filling a car with diesel at a fuel station in New Delhi September 13, 2012. REUTERS/Mansi Thapliyal/Files

A worker switches on a fuel pump before filling a car with diesel at a fuel station in New Delhi September 13, 2012.

Credit: Reuters/Mansi Thapliyal/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - State-run Indian oil marketing companies can now raise diesel prices in line with increases in global crude oil prices, Oil Minister Veerappa Moily said on Thursday, a move that could help the government reduce its vast subsidy bill.

COMMENTARY

VIVEK RAJPAL, STRATEGIST, NOMURA, MUMBAI

"Given oil companies still need to take the approval from government authorities, I am not too excited about this news. Though the first market reaction is positive, I really doubt the sustainability of such a reaction based on this news, especially once markets take a look at details."

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

"It's better to make step-wise adjustments rather than a one-off large scale adjustment. Earlier, when petrol prices were de-regulated, they hardly responded to market forces. Today's announcement will depend on how frequently and how genuinely OMCs respond to market forces."

ANOOP VERMA, BOND DEALER, DEVELOPMENT CREDIT BANK, MUMBAI

"It is a positive sign. Everyone is however little sceptical about how fast or will it be implemented. The government is the owner of these companies and will always have a say in the pricing. Bonds markets went higher initially but prices gave up some gains later on this scepticism."

ANAND MAHINDRA, CHAIRMAN, MAHINDRA & MAHINDRA (MAHM.NS), IN A POST ON HIS TWITTER PAGE

"If the minister's statement re oil cos flexibility to tweak diesel prices is the 1st step to price decontrol, then it's a bold & overdue step."

PARAS ADENWALA, PRINCIPAL PORTFOLIO MANAGER, CAPITAL PORTFOLIO ADVISORS, MUMBAI

"The announcement would be productive if in reality OMC would have freedom to raise price in line with international prices.

"This is conditional, we need to understand what is small quantity and what is over a period of time. Do companies really have the freedom to raise prices, or is it again government calling the shots?"

GAUTAM SINGH, ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

"Even a one rupee hike in diesel will lead to an 80 billion rupees reduction in subsidy. So, even a 10 rupee hike over a period of time, can have a 400-450 billion rupees impact on the fiscal deficit.

"However, it seems difficult to implement given that the government will face general elections in a year and half."

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI

"The prevailing thought is there is certainly a sense of inevitability considering the huge subsidy burden and the need to maintain the fiscal deficit to GDP ratio at 5.3 percent. In that context, there is inevitability of upward price adjustment in petroleum prices. The magnitude and the timing will be worked out between the government and the OMCs. However, we await clarity."

A. PRASANNA, ECONOMIST, ICICI SECURITIES, PRIMARY DEALERSHIP LTD, MUMBAI

"It's kind of ambiguous. But if they're able to push through the increases over a course of six to seven months, it will improve the prospects for next year's fiscal deficit. However, it will be inflationary.

"This kind of signals there will be regular increases. It will push up inflation expectations, and will lead to second round effects."

(Reporting by India Treasury, Equities, Markets teams; Editing by Ranjit Gangadharan)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Press Event

Press Event

Modi takes tea, but no questions, in first press event as PM.  Full Article 

Monetary Policy

Monetary Policy

Finance Minister Arun Jaitley favours interest rate cut - paper  Full Article 

Sundar Pichai Elevated

Sundar Pichai Elevated

Google's Pichai to oversee major products and services.  Full Article 

Reuters Poll

Reuters Poll

India's growth pace to pick up as reforms draw investment   Full Article 

Need For Reforms

Need For Reforms

Euro zone risks "relapse into recession" without structural reforms - Draghi.  Full Article 

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Health Of Lenders

Health Of Lenders

25 European banks set to fail health checks - sources.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage