A newspaper published a big
news item saying that in last n months, international crude oil prices have
come down by 20% but in India petrol prices have come down only by 8%. It says
that price of petrol should also have been reduced proportionally.
Now imagine if govt has do
reduce finished product's price by the same fraction its primary raw material's
price has reduced. Govt will need to reduce salary of all staffs by 20%, reduce
payments to vendors etc by same 20%; each cost component's % reduction may vary
but overall should necessarily reduce. It is near impossible to achieve this.
Now add to that the complexity
of inventory. Public sector oil companies and refineries bought crude oil at
the rate of Rs A. It takes time to refine, process and make finished product.
Due to this time lag companies can't start selling petrol and diesel at much
lesser price at the moment, since price will be according to the cost of crude
oil it paid several months back; and that was much more than current price.
There may be other several
other factors than the important ones I have highlighted. For example these
companies may have long term contract with crude oil suppliers. Or they need to
offset the losses made in recent past. Obviously this subject is as complex as
it is interesting.
But then why newspapers and
media houses run such populist stories which are half-understood? It is said
that half knowledge is worse than ignorance. If you don’t know that you don’t
know; it is a worse situation than when you know that you don’t know.
- Rahul
[Disclaimer: Views expressed are personal]
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