Tuesday, June 10, 2008

Oil prices in India

Two notions about oil prices in India need to be debunked.

One, the notion that the consumer is being subsidised. True, the consumer is being charged a price less than what the price would be tax is added to oil companies' selling price. But this is only because the duties are stiff. The consumer today does not bear all of the duty but he is still paying a price above the oil companies' selling price. This means he is being taxed, not subsidised.

Two, the notion that oil in India is still very cheap. The Economist compares petrol prices at the retail level in several countries. India ranks seven in a list of 15 countries- China, the US, Malaysia, Indonesia all have lower prices than we do.

1 comment:

Kartik N said...

I would be surprised if anyone felt that oil was cheap in India. On a PPP basis surely India is among the most expensive places for oil.