On 25/6/2010 the government of India increased prices of petrol by Rs.3.50, diesel by Rs.2/- kerosene by Rs.3/- per litre and LPG by Rs.35/-per cylinder. Petrol and diesel prices were decontrolled.
The increase has come at a time when food price inflation is about 18%.
The increase was avoidable. For the week ended 18/6/2010 foreign exchange reserves increased by $3 billion. If the government had not increased foreign exchange reserves the dollar value would have gone down making oil import cost less and there would have been no need for price increase.
Now also the price increase can be reversed if the government sells $3 billion. That will increase the value of rupee against dollar. Whenever the price of oil goes up government can sell dollars and rupee appreciates and there is no need of price rice. India has enough foreign exchange reserves.
Oil is a finite commodity. We have to use solar and wind power. Oil prices are likely to go up and any accident like that of BP oil leak in the Gulf of Mexico will have far reaching consequences.
The government does not have to run oil marketing companies. Some years ago there was an attempt to privatise them. Vested interests opposed that.