The Government of India has increased prices of petrol, diesel and LPG cylinders by Rs.5/- per litre, Rs.3/- per litre and Rs.50/- per cylinder respectively. Price hike of petrol and diesel has cascading effect on other prices. The Government of India claims the hike was unavoidable. Opinions differ about the avoidability of hike. There are claims and counter-claims. Some say oil companies were suffering losses. Some say oil companies made profit. One private oil company made a profit of Rs.10,000 crores for the year 2007-2008. There are claims that petrol, diesel, LPG and kerosene are subsidized. Kerosene is left out of hike. Those who use LPG are crème of the crème of the crème. Those who use cow dung cakes and fire wood subsidise LPG users. It is an exaggeration to say LPG users are crème of the crème of the crème. Ordinary people in cities and villages use LPG. Subsidies have to go for all products. But price hike in petrol, diesel and LPG is the result of manipulation of exchange rate. Crude oil price is in dollars. When dollar was falling the Government of India through RBI manipulated the exchange rate to keep rupee weak. If the rupee had become strong there would not have been need for price hike. Now it is for the Government of India to make amends for its mistake by allowing the rupee to become strong. If necessary, RBI should one billion dollars per day. Let the value of dollar be Rs.39/- or less. The price hike can be reversed. Inflation will be zero.
