The government seems to be keeping its powder dry to effect an increase in the prices of controlled petroleum products so that it may bring down the oil pool deficit to a manageable level before dismantling the administered pricing mechanism (APM) in the oil sector by March 31, 2002.
The recent terrorist attacks on the US and the resultant surcharged atmosphere in the country have provided the government with an opportunity to increase the prices of the politically-sensitive products like kerosene being sold through public distribution system (PDS) and the domestic liquefied petroleum gas (LPG).
It is being increasingly believed in official circles that any increase in their prices at this juncture would not evoke much protest from the public.
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The government faces a major challenge in containing the oil pool deficit which was Rs 12,500 crore on March 31, 2001, and is hovering around Rs 13,500 crore now. This was estimated to increase to around Rs 16,000 crore by the end of March 2002 if the average crude price during the current fiscal had ruled at around $25 a barrel and payments to Oil and Natural Gas Corporation and Oil India Limited for indigenous crude were kept at $16 a barrel.
However, indications are that in case the US indulges in large-scale hostilities now, its fuel requirements would shoot up sending the world crude prices in a tizzy.
This will have an adverse impact on India