The government has already built strong foundations for decontrolling diesel by regularly increasing retail prices by about 50 paise per litre. As a result, people have accepted the moderate and frequent changes in prices, and political parties no longer try to organise nationwide protests against any increase in fuel prices.
But the government needs to give a clear assurance to private companies that will set up or expand their network of petrol pumps after diesel is decontrolled. If international prices rise uncomfortably, it should not rush to impose price controls again because higher prices will actually encourage energy conservation and efficient use of fuel. And if it feels politically compelled to freeze diesel prices, it should compensate both public and private companies for their losses so that the market remains competitive. Read More