The price of crude oil has touched $100 a barrel. India does not have adequate reserves of crude oil. Moreover, public policy for tackling this vexed issue has been populist. To contain inflation and to avoid ruffling political feathers, governments have refused to raise the prices of petrol, diesel, kerosene and LPG. This has resulted in huge losses to state-run oil refining companies. So what happens now? Amitav Ranjan gives the big picture

• Why has the rising price of crude oil become a cause of concern for India?

India lacks sufficient reserves of crude oil. Also, it has limited monies at its disposal to finance the state-run oil refining-cum-marketing companies that are losing money due to the freeze on consumer prices.

• Why has the government not raised consumer prices of the four fuels?

With international crude prices on a consistent uptrend since 2003-04, the retail prices of the four products should have been gradually raised. However, the government adopted a populist stance in the face of state elections by advising the oil marketing companies (OMCs) to keep consumer prices under check. There are also concerns that raising fuel prices would trigger inflationary pressures. The clamour by Left parties has also served to dampen the initiative to align the prices. But eventually, the consumers and the economy may be faced with a larger price shock and adjustment than what was originally avoided.

• What is the extent of financial loss to OMCs?

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