In fact, not only do we have to allow prices do be determined by the market as the committee notes, but we also will have to seriously consider putting a floor to crude distillates’ prices. This will have to be done so that prospective alternative energy entrepreneurs can plan for assured prices for the energy they generate. Given that the crude demand-supply situation is as taut as it is, crude prices will be as volatile as they have been, in both directions. Such volatility in price will provide mixed signals since alternative energy has to compete with fossil fuels.

Taut energy markets have been having a significant impact on the most essential form of energy, namely food. Food prices have been rising in the face of rising demand, stagnant yields, rising energy, fertiliser and other input prices and finally diversion of food for bio-fuels. Delaying price increases of crude distillates will mean hampering our food security. With a population of a billion plus, that is like playing with fire.  

Suyodh Rao is a Hyderabad-based economist and oil-watcher

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