Jag Venugopal's Blog

June 25, 2010

A small victory for market forces

Filed under: India — Jag @ 6:47 am

It appears that the Government of India has got out of the business of subsidizing motor fuel prices. What a novel concept, and one coming just a couple decades after the collapse of that mecca of fiat pricing, the Soviet Union. Indian motorists can now pay the actual costs of their consumption without the distortion induced by either government subsidies or government cross-subsidies.

Unfortunately, the prices of kerosene (a common cooking fuel) and cooking gas are still immune to market forces. As prices of diesel and gasoline go up in lockstep with those on the global market, expect a lot more adulteration of these fuels with the still-subsidized kerosene. Additionally, expect a lot of cars to continue to be jerry-rigged to accept cooking gas as fuel.


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