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Rabble Rousing Random Ramblings by S Jagadish is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License.
Strikes are a form of economic terrorism
This week almost all parts of India have been significantly hit by striking truckers and oil PSU officers. As a result, the supply of petrol, diesel and other fuels used for transportation & cooking has dwindled, most places in India are facing a severe shortage crisis, the price of commodities has gone up due to scarcity of supply.
There are long queues at the few petrol dispensing stations that do have limited supply. People are finding it hard to go about their normal business, including going to work, sending their children to school, buying commodities, etc. People are unable to travel by road or air. Manufacturing companies are finding it tough to transport their products around. My company has a cab pickup-drop service, but all drops from the afternoon have been cancelled. This means anyone who came in to work by cab (me! me! me!) has to figure out how to get home after work!
Despite the fact that petrol & other related fuels (kerosene, LPG, CNG, diesel, etc.) are included in the list of commodities under the Essential Commodities Management Act, the government hasn't acted tough with the striking folks.
It is likely that those striking have legitimate demands. But I find it abhorring that the general public is expected to put up with the outcome of their actions, in much the same manner as my cable operator asking me to put up with the inconvenience when all non-Kannada channels were off the air during a one-day strike over Belgaum, in 2006.
Given the huge impact on the country, I'd say this is a form of economic terrorism as well.
Labels: petrol, strike, terrorism
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Where's the vision, Mr. Prime Minister?
Petrol, diesel and LPG prices were hiked yesterday by Rs. 5 per litre, Rs. 3 per litre and Rs. 50 per cylinder. The Left parties are up in arms, and as usual, will be forcing general strikes across the country on behalf of the people of India they claim to represent.
Prime Minister Manmohan Singh suddenly realized that he had a responsibility to address the country's citizens and explain the rationale behind the drastic increase.
The saddest part of the PM's speech is the lip-service given to investing in the exploration & tapping of alternate non-crude sources of fuel, such as the sun, water, winds. There was no mention of the budget allocation for these efforts. Of course, this was too good an opportunity for him to let go. So he made sure he referred to the Indo-US civilian nuclear energy deal when he said 'We have to develop renewable sources of energy, including nuclear energy.'
But really, I was keenly looking forward to the PM presenting his vision of how India would move away from its reliance on crude. Surely, if global crude price increase is such a significant contributor to inflation & has the potential to drag down economic growth, it makes sense to gradually switch to alternate sources of energy. Yet, there was no such vision on display.
There's very little chance that crude oil prices will dip, given the instability associated with Iran and Iraq. So will the government keep issuing oil bonds to be paid for by a future generation? Will the government do something about the oil marketing PSUs? Does India really need three of these (Indian Oil, Bharat Petroluem & Hindustan Petrolem)?
Will the price of petrol ever be an easy-to-make-sense-of value? The prices in various cities are: Rs. 50.56, Rs.55.88, Rs.54.29 and Rs.55.07. Why can't the public be saved the torture of hunting around for small change? Just round-off the prices to the nearest 50 paise and spare us the torture!
Labels: communist, crazy commies, left, loony left, manmohan singh, nuclear agreement, petrol, prime minister
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Crude oil prices went above $73 a barrel a few days ago, forcing the government to finally raise prices of petrol and diesel. Petrol now costs Rs. 55.15 in Bangalore, an increase of nearly 9%. Similar percentage increases resulted in other parts of India. However, Karnataka imposes the highest sales tax on petrol, making petrol here the costliest in India.
In December 2004 when I ranted about the bizarre cost of petrol and then wrote some Perl code to help me ensure that I didn't pay any extra money to the retailer, petrol cost Rs. 44.21 in Bangalore. So in 1.5 years, the price has gone up by 25%. That amounts to an increase of 16% per annum.
In contrast, world crude oil prices went from around $30/barrel to $70/barrel over the same 1.5 year period, an annual increase of 75%. The crude oil mix/basket that India imports currently costs around $68/barrel.
The government had little choice but to raise the prices. Yet, it chose to leave LPG and kerosene prices untouched, since raising those prices would apparently affect poorer and weaker sections of society. I don't understand why I'm being subsidized by the government for using a LPG cylinder at home. Even if the government increases the price by Rs. 50 per cylinder, I, and I dare say, millions of other folks who do not belong to the weaker and poorer sections of society, will be able to bear the hike. Effectively, the government's subsidization is untargetted. Those who earn five digit salaries per month and those who barely make a few thousand a month are paying the same for a cylinder of LPG.
The protests by several political parties is entirely expected. If the 'Cretinuous Commies'/'Loony Left', BJP etc. don't agree with the government's decision to increase petrol and diesel prices, what they ought to do is to ensure that prices remain unchanged in their states, by taking a hit on sales tax collections. Will they do that? I doubt it. So much so for empathizing with the people.
This 'Economic Times' report suggests that the government is at last about to let the oil companies take charge of pricing rather than having the government revise prices.
Around 10 months ago, I wrote about how the oil marketing PSUs were spending money on advertising, roping in celebrities as brand ambassadors etc. when the government should seriously thinking of merging the multiple companies into one single entity. I don't think that'll necessarily create a monopoly. In any case, it isn't as though there's perfect competition right now. Having one single PSU would probably create a more competitive playing field now that Shell, Reliance etc. are increasing their market share.
Yet, instead of reacting to international crude price increases, isn't it a far better option to explore alternate fuels? What is the government's strategy towards ensuring that supply shocks (Middle-East, hurricanes, government actions etc.) will not damage the economy? Is a natural gas pipeline from Iran passing through Afghanistan and Pakistan the solution? Perhaps not.
Labels: communist, crazy commies, left, loony left, petrol
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Pay more for petrol, save the oil PSUs, help them advertise more!
Given that I travel a long distance to the IIM-B campus twice a week, nearly 80 km on Fridays and Saturdays, it is but natural for me to wonder about why petrol prices cannot be rounded off better and come up with ways to prevent the dealers from pocketing small change.
Nowadays, a petrol price hike is more or less guaranteed on a monthly basis because, as the honourable minister from Mayiladuthurai tells us, the beloved public sector units will suffer huge losses if prices do not go up in sync with international crude prices.
I must admit that I have no idea why we have four oil marketing companies (OMCs), viz. IOC, HPCL, BPCL and IBP. Why can't we have just one if they're all doing the same thing, and just at different scales? I'm fairly sure economies of scale would work out perfectly and more efficient production, refining and retailing would ensure lower costs and hence lower prices for consumers. As it is we have private players like Reliance & Shell setting up outlets at various places in the country, typically just outside the city to cater to highway travellers. Isn't there a danger of too many cooks spoiling the broth? Having so many companies in the same arena is perhaps to make it appear as a perfectly competitive market and hence make great economic sense. But we know it isn't, not when a huge chunk of those companies are government owned. Of course, the problem is that oligopolies work both ways: collusion to raise prices or fierce competition to reduce prices.
The minister points out that the OMC's made crores of rupees worth of cash losses due to increasing international crude prices. Yet, they have spent in excess of Rs. 700 crores on advertisements in the last three years. I have no idea what sort of calculator PTI (or Rediff?) uses, but the total works out to around Rs. 732 crores to me. Granted that the sum is over three years. But aren't these companies killing off each other? They're all effectively selling the same products, under different brand names. While one uses Sania Mirza as a brand ambassador, others use the likes of Anil Kumble, Irfan Pathan etc. So why should there be four different companies?
It really does seem like a waste of the government's money, i.e. our money, to sustain these many PSUs operating in the same field. I don't really care which company's petrol pump I go to. Do you? Should you? Perhaps not unless you've got some exclusive privileges that I don't. Perhaps not unless your vehicle refuses to accept any other brand of petrol/diesel.
Labels: petrol
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As a followup to last month's rant on the way petrol is priced, I started wondering about how much quantity I should fill to ensure that I do not fork out any extra money and in fact the petrol pump dealer instead ends up paying the deficit. Through some trial and error, I hit upon the fact that currently, when petrol costs Rs. 44.21 per litre in Bangalore, I stand to gain 5 paise when I fill 3.1 litres since it would work out to Rs. 137.05. But really I'm never going to pay that .05 bit and neither does the dealer ask for it.
So when I do it continously enough, I'm bound to recover my earlier losses (after a lot of petrol filling!). But the price of petrol is never going to be Rs. 44.21 forever. So I wrote some simple Perl code which lists out the quantity of petrol I need to fill to gain in the deal, assuming that the dealer doesnt bother about a deficit of upto 10 paise. Feel free to change the location of your Perl interpreter in the first line.
#!/usr/local/bin/perl -w
use Getopt::Long;
use POSIX;
my $usage="Usage: ".__FILE__." -rate [petrol price per litre] -maximum [amt. of money]\n";
my ($rate,$maximum);
GetOptions("rate|r=f" => \$rate,"maximum|m=i" => \$maximum);
die $usage if (! defined $rate || ! defined $maximum);
my $minpetrol=1;
print "Money limit (max): $maximum\n";
print "Petrol limit (min): $minpetrol\n";
print "\n";
print "Petrol\tAmount\tPotential Gain\n";
for(my $i=$minpetrol;;$i=sprintf("%.1f",($i+.1)))
{
my $totalamt=sprintf("%2.2f",$i*$rate);
my $flooramt=floor($totalamt);
my $diff=sprintf("%.2f",($totalamt-$flooramt));
last if ($totalamt > $maximum);
print "$i\t$totalamt";
print "\t$diff" if ($diff > 0 && $diff <= .1);
print "\n";
}
Labels: petrol
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Why is petrol priced so ridiculously? It costs 40.89 in Calcutta, 37.84 in Delhi, 41.25 in Madras, 43.23 in Bombay and 44.21 in Bangalore currently.
Why cant it be in nice round numbers, like say 43 or 45 Rs/litre. Currently if I need to fill up my bike tank with two litres of petrol [in Bangalore], I need to dish out Rs 88.42. I obviously dont have 42 paise of change with me, so it conveniently gets rounded up to 88.50. Instead of 2 litres, to avoid hassles of having change, if I choose to fill up petrol worth Rs. 100, I dont get petrol for the full Rs. 100. I get it for Rs 99.91. Who pockets the 8 paise in the earlier case and 9 paise in this case? Obviously the dealer.
If the various governments want to ensure that they get revenue in the form of taxes etc., why cant they make sure that products are priced in such a manner that there is no chance of intermediaries pocketing small change? Mind you, we're talking of 8-9 paise per customer. Add up this amount across all the cities, across all the petrol pumps and for all the customers who use it, and we could be talking a fairly big sum.
Labels: petrol
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