Government starts to pass the benefits of crude price fall to the people

How far the consumers in India can benefit from crude’s fall in the international market? Last few days trend is positive from consumer’s angle. Three of the four most used crude products have recorded price cut. On Monday morning, the petroleum companies have cut petrol and diesel prices. On the same day, government has reduced the prices of non-subsidized cooking gas by more than 14% to Rs 752. Similarly, aviation fuel price also reduced, giving relief to the airlines industry which is running on losses.

The 14 per cent reduction which amounts to Rs113 is really big. But subsidized gas price will not come down. The beneficiary here is the government as it can cover up some parts of the subsidy on cooking gas. At present cooking gas subsidy is Rs 20/kg for up to 12 cylinders.  It is estimated that the real subsidy burden for the government on subsidized gas came down to nearly Rs 17/kg. Subsidized gas price is the most impactful one, but the government may not opt for a cut in it as it may hurt government’s gain from the present crude fall.  

On the crude front, price came down to sub $70 levels in the international market on Monday. The Brent variety was traded at $68.4.  Shock from oil’s fall is also started to generate effects on producer countries. The Russian Rouble has declined by nearly 4 % before central bank intervention rescuing the currency from further fall. A major part of Russia’s budget is financed out of money from oil export. If the slide continues, other oil exporting country’s currencies also may follow the same trend. It mayl happen for those who doesn’t have sizable foreign exchange reserve and at the same time depend too much on oil export revenue to run the budget. 

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