40% of all government revenue, both at the state and centre, is accounted by petroleum products. So a reduction in revenue implies less revenue for running the government, development programs, maintaining the army etc
Despite that, the central government has done just that - marginally affecting a cut. The question is whether state governments will follow.
And by the way - the base price of Rs 22 which are being touted is the subsidized price - that insulates India from oil price shocks. You cannot subsidize for ever - otherwise like in 1990 - our fiscal situation will be so bad that we need to pledge our gold.
Besides, India is a net oil& gas importer. Leave alone countries like India, even net oil & gas exporting countries like Indonesia, Malaysia, Nigeria etc have undertaken steep internal pricing of oil products. In fact, riots broke out in Indonesia following this step!
The PM should have done more by even increasing the price. Unless petrol finds its true market value, we do not value the product and alot of waste occurs. So a price hike is the right step in the era of dwindling supply and rising prices of oil as it curtails consumption of oil - cutting waste and adoption of more efficient technology
The impact is immediate - Indonesia, Malaysia & India raising prices, was the trigger for oil futures to start crumbling on the prospect of reduced demand. Once price of oil is reasonable, the government can reverse the hike.
