Pricing of Energy Goods in India: How Is It Done?
The retail price of petrol, diesel, liquid petroleum gas (LPG) and other energy products in India is a complex mixture of crude prices, taxes and subsidies by the central as well as state governments. In this paper, we discuss the break-up of these components of pricing. The discussion is set in the background of international pricing mechanisms and recommendations of international agencies such as the International Institute of Sustainable Development and the International Monetary Fund. The main point that emerges from the discussion is that since these products are necessities with very low elasticity of demand, incidence of taxes and/or subsidies on these products are almost 100% making them ideal tools for the international cartels (seeking profits) and local governments (seeking revenues) to maximize their pecuniary benefits from the manipulation of such prices. The complex formula leading to the retail price is a corollary of these interests.
KeywordsPetroleum pricing Energy subsidy Electricity cross-subsidy Diesel subsidy LPG subsidy Petrol subsidy
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