It was on December 1 last that the so-called open market policy of petroleum products being priced based on market forces was suspended, no need to say voluntarily by the oil companies, so as to help the ruling BJP approach the electorate with confidence, without having to explain spiralling fuel prices. The mission having been accomplished, the fetters on the petroleum companies have been taken off and they are free to do whatever they deem fit, as petroleum prices are purely a function of the market forces.

There are two key takeaways from the development, the most important of which is that the open market policy is based not on market forces but is at the beck and call of the government. When it is convenient for the government, open market forces will come into play and nobody can do a thing about it. But when it is inconvenient for the government, the market forces will go into hiding.

Whenever petroleum prices go up, the government throws up its hands in helplessness as it is market forces that decide prices and it cannot do anything, except sympathise with the people, at the same time gleefully accepting greater proceeds for the government kitty. But from the above example, it is obvious that it is the government that decides to what extent market forces should come into play. The corollary is that the government refuses to intervene to hold prices because it does not want to do so, not due to any inherent constraints, but due to its own choice.

The four-month breather to facilitate election is no reason for consumers to rejoice that they have saved money. For, there is a tacit understanding between the government and the oil companies that once the fetters are off, the companies are free to do what they want so that they are able to recoup the notional loss they may have suffered during the suspension—notional because the losses are worked out on the basis of doctored numbers – and perhaps make even more money.

Given that the international price of crude at the time of suspension was only $82 per barrel, as compared to $120 that it is hovering around currently, consumers have a grim summer ahead. And to make matters even worse, developments in the wake of the Russian invasion of Ukraine has altered the global energy scene so dramatically that all previous calculations have gone awry. The price rise so far has absorbed barely 1 percent of the impact of the new market forces, which is an indication of what is in store for the people.

From time to time, the government keeps saying it is constantly taking stock of the geopolitical developments and would make 'calibrated interventions' to safeguard the interest of the common man, but in practice everything is arrayed against the people. The skewed petroleum policy of the government means that each price increase in the international global market is an opportunity for the government to make more money. Occasional gestures of excise duty cuts have occurred, but these have been overshadowed by a consistent policy to keep petroleum as a cash cow, which means it is the people who have to suffer.

Indian consumers are among the worst sufferers of ‘open market forces’ as they have to dish out more money when crude prices go up, while not getting any benefit of decline in prices because the difference is always pocketed by the government as well as the marketing companies. And with prices now set on a unilateral course, this has dangerous portends for the period that lie ahead, considering that the world’s response to the happenings in Ukraine and around has not equalled the task cut out for it. That’s indeed sad news, particularly for Indian fuel consumers. (IPA Service)