India: Soaring hydrocarbons prices

In India, petroleum products are getting costlier day by day. The government yesterday hiked petrol prices by Rupees 4 per liter and diesel by Rupees 2 per liter. Kerosene and cooking gas (LPG) have been spared from any increase in price. So, petrol will cost more than 50 Rupees per liter and diesel more than Rupees 35 per liter from now on. Since the global oil prices had been shooting up and crossing $70 per barrel, Indian government had to take this decision. The state owned petroleum companies, which own more than 90% of the nation’s retail outlets, have been recording heavy losses due to the subsidized rates at which they were selling petrol and diesel.

Last time, oil prices were revised in September 2005. This kind of continuous and abrupt hike in petrol and diesel will only hamper India’s growth. I think it’s the time when India needs to be resolute on solving soaring fuel problem. Currently, India depends on imports for more than 70% of its oil requirements. If it reduces its oil dependence on others and fulfills the major part of its demand on its own then it will be able to keep the growth track intact, and fiscal deficit and inflation under control. One option is to ponder over exploring its crust to find gasoline resources. India is so vast and diversified in its natural resources that it can surely find more underground resources under its territories.

Other option is choose some alternative fuel. I really admire the way Brazil has solved its fuel problem, the way it has successfully reduced its oil dependence from 85% in 1978 to 10% in 2002 through the development of alternative fuels. 20% of Brazilian cars run on alternative fuel only i.e. ethanol and around 50% of the cars run on mix-fuel that is petrol and ethanol. In late 70s, Brazilian Government forced carmakers to modify the engines so that cars can run on ethanol because they foresaw the fuel crisis in the coming years. And now they are the pioneers in alternative fuel. India should also move on the footsteps of Brazil and start pouring money in alternative fuel research so that it can reduce its oil dependence and can become an economically stable nation in long run.