apparently the price of petroleum (gasoline in american) has been "deregulated" in India, with the obvious impact being the price rising because the subsidy provided is gone.
I found this reaction to be somewhat hilarous (found on NDTV's live TV): "you know, the common man has been really hurt by this...I have a Santro and an Accent and now I have to think whether I want to drive my Accent..."
I might wager that this is perhaps (partly) the point of making consumers face the "right", or at least, a "less wrong" price?
Oh, you thought I'd go after the fact that this supposed common man has two cars in a country where the number of malnourished children out number those in sub-saharan Africa, didn't you?
Deregulating the price of fuel is a brave step, but I'm not entirely sure a wise one. Of course, the people making this decision would (should?) have thought about this before. The "right" price arrived at by a calculation that does not allow for some weighting of those worse off isn't right, after all. "Free" markets, that elusive concept, are not going to put weights on anyone.
2 comments:
it's funny to see the coverage on Headlines today, with well-off people sitting in their air-conditioned cars making angry noises about how the government hates the common man. I suppose instead of subsidizing the price of petrol, the government could provide direct subsidies to the lower income groups which might work out better. And diesel, if I remember correctly, is still somewhat subsidized, so transport costs should not be as badly affected (I think).
I'm not sure how 'free' the price of petrol has been made, though, since it doesn't completely move in step with crude prices. It hasn't ever gone down in the last one year, although crude prices did go down in the middle.
Anyway, I went and bought myself a cycle today, so hopefully the higher price will provide further incentive to cycle instead of taking the car out.
Subsidizing a fuel is cheaper (I would guess) once you account for transaction costs, but well, most of economic theory doesn't. Making a subsidy to lower income groups is fraught with difficulty when it comes to operationalizing it; much easier to go through the fuel route.
(Three cheers for Coase and Williamson)
Why would you expect crude prices and petrol prices to move in step?
Bangalore would be a fun place to cycle about.
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