Three months after the government decided to cap the number of subsidised liquefied petroleum gas (LPG) cylinders and allowed oil marketing companies to raise diesel prices, Indian Oil Corp is finding the going tough. The companyÂ’s Chairman and Managing Director, RS Butola told a business newspaper that the cap and direct cash transfer are indicators of better-functioning markets.
The governmentÂ’s decision on capping the subsidised LPG cylinders was in view of the larger macroeconomic scenario. Last year, IOC had an underrecovery of $26 billion. Of this, $16 billion was on diesel and the rest on superior kerosene oil and LPG.
Global LPG prices have shot up. It is the only commodity that is imported. IOC has surplus of all other products. The burden on account of LPG alone is going up, he said.
The principle of pricing the product at the market level would help, irrespective of whether the number of subsidised cylinders is capped at six or nine.
The sheer notion of either having market price or limited subsidy puts resources to an optimal use. If something is available cheap, there is no restrain. Capping and direct cash transfers are some indicators that enable better functioning of markets, Butola saod.
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