Modi’s Government Frees Diesel Prices and Increases Gas Tariffs

India freed diesel prices from government control Sunday while raising natural gas tariffs in the biggest-yet reform by Prime Minister Narendra Modi’s government, as it aims to boost the country’s economy and overhaul its energy sector.

The decision on diesel targets one of India’s costliest subsidies for one of the world’s dirtiest fuels.

Those subsidies – meant to help poor farmers using diesel-powered water pumps – inadvertently led the country to consume more than four times as much diesel as petrol, at large cost to the national budget. Almost half the country’s $23 billion spent on fuel subsidies last year went for diesel, according to the Delhi-based National Institute of Public Finance and Policy.

Meanwhile, India’s trade deficit has ballooned, reaching $14.3 billion in September, thanks to years of high international oil prices and a dependency on petroleum-based fuels like diesel, kerosene and gasoline for 22 percent of its entire energy consumption.

While India began tweaking diesel prices last year and rolling back some subsidies, the decision to fully deregulate diesel now appeared timed to a sudden drop in global oil prices last week, easing the burden on Indian consumers. Diesel prices on Sunday, the first day of the new fuel regime, were slightly lower than a day before in major Indian cities like New Delhi, Mumbai and Kolkata.

via Mainichi

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza