There has been a significant jump is auto fuel costs across india. Petrol in Bangalore (highest in the country) is about Rs 58.60 /Lit (USD 5.15 / Gallon) to Delhi (lowest) which is about Rs 50.60 /lit (USD 4.45 / gallon). Diesel has shown a similar jump in costs though it is still heavily subsidized. This consumer hike is also accompanied by a huge hit in taxation as both customs duty and excise have been cut. The state governments (who typically levy between 20 - 26 % VAT) may cut the rates slightly, however the rise is not likely to fall below 8 % or so. This is still fine if you look at the background.
The public debate has been on how ´fair´ the hike is and the left front (along with the ever opportunistic right wing hindu parties) have been talking of cutting taxes to the bone etc. While i generally am sympathetic to the leftś agenda, this time around yechury is very wrong. And he is also being stupid in calling the losses incurred bythe oil majors ńotional´. Notional does not mean imaginary. The private majors (reliance, shell et al) have already scaled down local sale (reliance exports bulk of its production), shut down bunks and generally used the rise in crude to improve their margins. The left talks of windfall profit tax, but there is no jurisprudence to back that. The left always loves revolution :)
So instead of beating around the bush, lets seize the bull by the horns and let the cat out of the bag (thanks jim hacker). The real problem is rise in consumption, aspirational life styles that are unsustainable and the usual thick headed human need to elevate the standard of oneś living. In a way Georgie Podgie Bush is right in that costs are rising due to higher consumption by india and china. People who were taking the bus to work a generation ago are worrying about parking for the second car. What the US did with its post WW 2 loot, india is trying to emulate in the 21st century. Well, wake up, the party is over.
The future is renewable power and a lot less of it than now. Distributed generation and consumption is the order of the day. While i will not comment on the use the state puts its oil taxes to, i for one am firmly for higher taxation on fuels to *curb consumption*. As a acid test i will track automotive sales for the next 2 quarters. I am betting that the fuel price hike will have no effect on auto sales and will serve to weed out the more inefficient models. Lets see...