Oiling The Palm

Government has subsidized fuel by almost Rs. 6 billion in the first 7 months of this year with the highest subsidy coming in July of Rs. 1.2 billion. Government has subsidized fuel by almost Rs. 6 billion in the first 7 months of this year with the highest subsidy coming in July of Rs. 1.2 billion. Continuing to sell fuel at below cost coupled with the weak rupee and rising crude oil prices will put pressure on the government’s budget.

Economists say across the board subsidies, like the one for fuel, also benefit the rich and drain money that should go to deserving segments of the population.

Left leaning to capitalist governments have used subsidies on diesel and kerosene to cushion the impact of inflation.

Even privileged users of petrol and furnace oil have benefited from subsidies financed by taxpayers.

Subsidies have been offered directly for some fuels while diesel which is the most popular fuel source with a crude oil base has benefited from a cross subsidy from petrol which also has a crude oil base.

Economists say that across the board subsidies like the one offered for fuel are not the best way to protect disadvantaged segment