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

Earnings Season

Earnings Season

Reliance Q4 sales rise, refining margin narrows.  Read 

Innovative Solution

Innovative Solution

Turning smog into jewels - a Dutch designer's solution to Beijing's pollution.  Video 

Insider Trading

Insider Trading

Rajaratnam's brother loses bid to dismiss insider trading charges.  Full Article 

Literary Giant Dies

Literary Giant Dies

Mourning and memories in Gabriel Garcia Marquez's languid hometown.  Full Article 

S&P on India

S&P on India

S&P: India's ratings to depend on next govt econ, fiscal policies.  Full Article 

Ambitious Aim

Ambitious Aim

In green car race, Toyota adds muscle with fuel-cell launch.  Full Article 

Bond Market

Bond Market

A star abroad, RBI boss riles bond traders at home  Full Article 

Reuters India Mobile

Reuters India Mobile

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