Discuss the implications of deregulation of the petroleum prices on economy.
For many years, government has subsidized energy with the objective of protecting consumers from international price volatility. But, in recent past; government has deregulated the prices of petrola nd diesel to reduce the subsidies burden.
The policy allows oil companies to change price with little or no interference from government. If the international oil prices start rising, the government would not be able to intervene, which could have a direct bearing on the price of essential commodities, as the transport sector mostly runs on diesel.
With companies having complete control over price mechanism and no government subsidies the consumption pattern of poor section of society is likely to change.