40% of all government revenue, both at the state and centre, is accounted by petroleum products. So a reduction in revenue implies less revenue for running the government, development programs etc
Despite that, the central government has done just that - marginally affecting a cut. The question is whether state governments will follow.
The base price of Rs 22 per litre which are being touted is the subsidized price. You cannot subsidize for ever - otherwise like in 1990 - our fiscal situation will be so bad that we need to pledge our gold.
India is a net oil& gas importer. Leave alone countries like India, even net oil exporting countries like Indonesia, Malaysia, Nigeria etc have undertaken steep internal pricing of oil products. In fact, riots broke out in Indonesia following this step!
The PM should have increased the price even further. Unless petrol finds its true market value, we do not value the product and alot of waste occurs. So a price hike is the right step in the era of dwindling supply and rising prices of oil as it curtails wasteful consumption of oil.
The impact is immediate - Indonesia, Malaysia & India raising prices, was the trigger for oil futures to start crumbling on the prospect of reduced demand. Once price of oil is reasonable, the government can reverse the hike. Once global oil price retreats, global commodity prices maybe expected to follow suit, lowering global inflation
