India Warns They too Cannot Subsidize Energy Costs Forever

By: TraderMark Tuesday, June 03, 2008 6:17 PM

Sectors: Finance , India , Transportation

Symbols: CGI, VLO

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We talked about this just yesterday (China Leads Asia in Retreat from Inflation Battle)... at some price point these subsidies to cap prices in Asia become unaffordable - first went the smaller countries, now comes India, the last elephant to fall will be China which thanks to Americans sending money in droves every day (via Walmart) can afford to keep subsidizing but if oil begins a new summit ($150+?) it simply hits a point where even China cannot continue to subsidize everything (they are doing it in both the food chain and the energy chain)

UK Guardian: India Must Cap Subsidies, Will Sustain Growth

India must not further subsidise soaring prices of oil and other commodities to protect consumers, but will be able to sustain high economic growth despite global challenges, the prime minister said on Monday. (that will be a good trick, let me know how that works out for you)
As his government remains split over how to bail out state oil firms hit by the surge in crude, Manmohan Singh told a leading industry lobby group that a wider political consensus in favour of a sustainable pricing policy was needed.
The government is concerned about the impact of high commodity prices at a time of slowing global economic growth. (don't you worry, US economy will be rebounding in 2nd half, slated to begin July 1, 2008)
"We cannot allow the subsidy bill to rise any further nor do we have the margin to fully insulate the consumer from the impact of world commodity prices and oil price inflation," he said. (solution: Print Money. Lots of it - I recommend helicopter drops myself. Works like a charm here - further it creates no inflation; with the correct type of government reporting.)
Oil prices are up more than 70 percent since mid-2006 and by 0855 GMT stood at just under $127 a barrel, but retail prices of petrol and diesel in India are now lower than they were two years ago.