Literature Review

March 6 KUALA LUMPUR, (Bernama) -- Consumers have to get used to the fluctuating fuel price
environment as market prices are being dictated by the managed float system, introduced by the
government last December to determine the monthly retail prices of fuel.
According to Randy Chug, Maureen cropper and Urvashi Narain 2011, The cost of fuel economy in
the Indian passenger vehicle market, 1818 P St. NW., Washinton D.C, resourses discussion paper, the
hypothesis has been tested extensively in United States. Although much of the literature suggests that
consumers undervalue fuel savings. (Alcott and woozy 2010), other studies (Sallee et al 2010) suggest
that consumers are willing to pay an extra dollar when buying a car to reduce the present value of fuel
costs by a dollar. This paper examines how car buyers in India value fuel savings.
Ex-Finance minister Mr. Pranab Mukherjee has politely declined to consider opposition demands for
rolling back the proposed hikes in fuel prices, citing the state of government's finances warranted the
hike. The only major study on the subject of petroleum pricing policy was conducted by Geeta Gauri
who published her findings in a book titled "Pricing For Welfare; Petroleum Products In India.
S.S.Khera's book "Oil, Rich Man , Poor Man " contains an analysis of the reports of the first three oil
price enquiry committees set up by the government of India, supplemented by inside information gained
by the author as the secretary in the petroleum ministry. The book also describes the pricing system
prevalent in India following the adoption of the krishnaswamy committee report. Prices of international
crude oil have averaged $107 per barrel for the Indian basket during the second half of November as
against $115.85 per barrel average during the first fortnight that formed the basis for the Rs. 2.22 per litre
cut. The reduction in oil price warrants a cut of around one rupee per litre in the petrol price including
taking into account the tax incidence.

In fiscal year 2008-2009, under-recoveries accruing to Indias state-owned Oil Marketing

Companies (OMCs) similar to the losses accumulated on product sold below cost are
expected to exceed $US40 billion. The effect of significantly lower product prices than input
prices a large effective subsidy has been the increasing accumulation of under-recoveries by
OMCs. Under-recoveries are a notional measure representing the difference between the tradeparity cost of refined product paid by OMCs and their realized sale price.

Reference
Cropper, M., Narain, U., & Chugh, R. (2011). The Cost of Fuel Economy in the Indian Passenger
Vehicle Market. Resources for the Future Discussion Paper, (11-12).
CHANDRASEKARAN, D. A STUDY OF THE PETROLEUM PRICING POLICY OF
GOVERNMENT OF INDIA.
Srinivasan, S. (2014). Economic populism, partial deregulation of transport fuels and electoral
outcomes in India. Energy Policy, 68, 465-475.
Thomas, R. G. (1982). Energy politics and Indian security. Pacific Affairs, 32-53