The diesel ‘reform’ does more harm than good

R Jagannathan

Yesterday’s non-policy is more dangerous than the previous one not because it is manifestly wrong, but because it needs extraordinary luck to pull it off. Underlying it all is not a belief in reform but the hope that global oil prices will fall, and the losses made by oil companies will somehow be neutralised quickly without anybody noticing. What we possibly have is deregulation subject to frequent political pullbacks, exactly of the kind we had on petrol till recently. The next 15 months will see a heavy calendar of elections with the grand finale set for May 2014. So, it is not guaranteed that the UPA will have the political gumption to press ahead with its tentative deregulation.read less read more

Anant Rangaswami

It cannot be the case that reform is reform only if diesel is totally unsubsidized. There is no argument that the size of the under recovery has grown thanks to the UPA’s own political compunctions, but the current decision is a welcome first step to undoing the damage done. It is important as a signal to all consumers of diesel that the happy days are over; it prepares them for a world when diesel prices are deregulated and reflect reality. The impact of diesel prices on all manner of goods is such that a steep hike would hit the average citizen hard. This soft route is easier for both bulk users and individual consumers to deal with.read less read more

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