The recent nose dive of the petroleum prices have surprised ( happily ) almost all of us . The experts have now come to a stable view that it is not just the lower demand due to slump in the world economy but there is also an over supply position from the producing nations leading to this steep and steady fall in petrol prices
Lower petrol prices would help in reducing the costs and inflationary pressure in the importing countries like India ..but the Indian government has preferred to smartly increase the excise duty on Petrol.. and has passed over only a marginal gain to the consumer. The full effect of the petrol price reduction thus is not passed over to the consumers and hence the pressure of inflation will not reduce to the full extent directly.Though the excise collection will enable the Government to check its deficit significantly and thereby control the inflation. In other words, the money supply will not rise due to lower deficits, thus controlling inflation.
These are the choices of the Macro Economists and they have played the game smartly.
But my concern is Simple like a common man. The Concern is… will the government reduce the excise when the petrol prices go up. Please keep in mind hat this is not a long term phenomena.. the prices will bounce back as soon as there are signs of recovery globally and the producers will than hit back with controlled production. A question like this need to be asked right now and a a soothing assurance from those in the Power need to be obtained. If this is not done, consumers will keep paying higher excise for a long long time.
