An analysis of petroleum pricing in India

Price of petrol was not fixed or controlled in the pre independence period and in the first post independence decade. During 1990s, the Administered price mechanism came into existence. For socio economic reasons, price of a few petroleum products like kerosene and LPG were subsidized, and some of the other petroleum products were priced above the cost of production. In the beginning of the financial year 2002, government dismantled Administered price mechanism. Though the import dependency of petroleum products decreased in early 70s, increase in overall domestic demand has resulted in petroleum products becoming once again import dependent. The crude oil price mechanism synchronized with pricing of petrol in the domestic market. Pricing of petrol in India is analyzed and compared globally. Petrol continues to be dearer commodity in the Indian market and the rising prices have a big negative impact on the economy.