14 Dec 2014

The gift of cheaper oil

The falling oil price is the gift that keeps on giving for the Indian government. It helps the balance of payments by cutting the cost of the 80%+ of its energy requirements Indian must import. More immediately, it has encouraged the government to eliminate the burden of diesel subsidies. Even further, it is allowing the government to address the current year’s fiscal deficit by slipping in excise duty increases as the retail price of petrol and diesel falls: this week it has taken a second bite at this apple. Finance Minister Jaitley has said that things like cheap LPG for affluent families, amongst other hidden benefits will be in the cross-hairs shortly and will probably be eliminated as soon as they can be targeted. Meanwhile, the programme of Uniform ID registration is being stepped up with short range targets for completion in order to increase the efficiency of benefit transfers as soon as practicable. Action on the non-revenue side is about to begin as well: stake sales in Coal India, ONGC and Steel Authority (SAIL) are to be completed by end-January 2015 to raise a prospective $10bn for the treasury. This effort began on Friday with an offer of more than 200mil shares in SAIL at Rs83 a share to raise nearly $300mil; the offer was well oversubscribed.

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