Posts from the ‘News’ Category

A WAVE OF ECONOMIC UNCERTAINTY













Advertisements

IDENTITY IN YOUR POCKET – ‘AADHAAR’


 

Carrying a bunch of papers in hand containing different identification proofs in order to get one document is tedious. Sometimes even after submitting the whole lot of papers and standing in queues for hours, we do not get the document as we miss out a certain paper. All this will be a history now as Unique Identification Cards (UID) are being issued to every citizen of the country. UID will contain all the details of an individual hence you do not need to carry a bundle of proofs along anymore.

INCEPTION OF UNIQUE IDENTIFICATION CARDS

UID are the identification cards that will be given to every citizen of the country to provide efficient welfare services. It will also help in monitoring various schemes and plans brought by the Government. The first talk regarding UID was carried out in 2006 when the issue regarding BPL cards was being discussed. Later, the project was to be carried out by the National Informatics Centre (NIC) over a period of 12 months. However during July 2006, a Processes Committee was set up for updation and modification in the chalked out UID plan. A “Strategic Vision on the UIDAI Project” was prepared and submitted to this Committee by M/S Wipro Ltd.

The two schemes- National Population Register under the Citizenship Act, 1955 and the Unique Identification Number project of the Department of Information Technology were handed over to an empowered group of ministers by the Prime Minister. Later, with the help of Planning Commission UIDAI (Unique Identification Authority of India) was set up. The objective of this authority is to issue a unique identification number that can be verified and authenticated in an online, cost-effective manner, which is robust enough to eliminate duplicate and fake identities.

The identity giver has its own identity. ‘Aadhaar’ is the name given to the unique identification number. In English, Aadhaar means support or foundation. However, the word almost justifies the meaning in all the languages. Aadhaar has been given a logo having a sun in red and yellow with a fingerprint at the center. It represents a new dawn of equal opportunity for each individual, a dawn which emerges from the unique identity the number guarantees for each individual.

HOW TO GET YOUR UID


Applying for a UID will not be that difficult as you just need to spare ten minutes for the purpose. UID number will contain not only the address proof but also the biometric details. First of all you need to get a finger print scan of all the fingers. Thereafter, you need to get your eye scanned in order to get your unique iris pattern. For this purpose, one needs to remove the lenses or specks if any. After that, as other documents get your mug shot clicked. Lastly, the officials take down your name, age, address and ask for proofs of those details. You can either of the following: Telephone bill, passport, voter’s ID, electricity bill, bank statement etc.

Several details are kept in mind while framing a plan for UID number. There are clauses that have been laid so that the details are not missed out and the information is correct. Hence, for people who do not remember their exact date of birth can mention their approximate age. In gender category, apart from male and female transgender is included. However, people having cataract operations will face difficulties in getting their iris scanned. An option is being explored for the same.

There is no age bar in order to file for a UID number. But the unique number of a child up to five years of age is linked to that of his or her parents or guardians. On completion of 15 years of age, biometric data is updated, but the number remains the same. In the same manner, even a new born can have a UID, and the biometric details can be updated time and again. In this case as well, the number of the card will remain the same.

It requires just ten minutes getting yourself enrolled for UID number but you will only receive the card within a time period of two months. The authority will use these two months in verifying the given details in order to make it authentic.

BENEFITS OF UID 

UID will relieve you from carrying bundles of pages while getting a document. Only a UID will be enough, providing all the identification proofs. Moreover, the system checks duplication of data. Even if someone files two UIDs then one cannot have different fingerprints and iris. The system scans the details and when duplication is seen in the biometric information, the entry gets rejected. Hence it provides a transparent image of all citizens. Also, it will be easy to file for a passport or a ration card with the help of a UID.

UIDs have not been made compulsory by the government at present but it is likely that within a few years government and many others would ask for UIDs to obtain various proofs.

JAN LOKPAL BILL: MEANS OF ANTI CORRUPTION OR A DECEIT TO THE NATION?


 

Scams and a series of corruption news are being heard since the beginning of the year. This created a wave of anti corruption campaigns throughout the nation. However, people like Anna Hazare and Baba Ramdev inspired many Indians to stand against corruption. The movement was to bring into function Lokpal Bill –The net against corruption. The drive undertaken by Anna Hazare and Baba Ramdev created many controversies and political disharmony in the country. Months after the drive started, the government gave some result that has startled the eyes of the nation.

Jan Lokpal Bill is a law that stands against corruption in the country. First such bill was introduced in 4th lok sabha during 1969. But, it got stuck up in Rajya Sabha. Thereafter, it was again introduced in 1971, 1977, 1985, 1989, 1996, 1998, 2001, 2005 and 2008 but none of them were passed. Hence in 2011 Anna Hazare, an activist against corruption went for a fast in support of passing the Lokpal Bill.

After months of political drama finally the cabinet appointed by the government has approved a draft of the bill. According to this draft, the body will have a chairperson and eight members, including four judicial members. Serving or retired Supreme Court judge would be the chairperson of the committee. However, 50% of the members including the chairperson will form the judiciary. Persons with “impeccable integrity”, with 25 years of experience in administration who has dealt with corruption and vigilance, would also form part of the Lokpal.

CLAUSES OF THE BILL 

The government said that it will present the approved draft in Parliament’s monsoon session which will begin from August. The government will also introduce a separate whistleblower protection bill.

  • According to the draft, any union minister, MPs or officials of group A or any equivalent to this grade can be investigated.
  • Sanction or approval under Section 197 Section 197 of the Code of Criminal Procedure, 1973 or Section 19 of the Prevention of Corruption Act, 1988, in cases where prosecution is proposed is not required to be taken.
  • The Lokpal will also have powers to attach the property of corrupt public servants acquired through corrupt means.
  • A time limit of 7 years from the date of registration has been put forward. After 7 years no investigation will be made on the case. However, it is considered better than the earlier National Anti-Corruption Act as it did not have any time limit on case investigations.
  • Lokpal, which would have five-year tenure, would not have the power to prosecute. It would recommend prosecution to the Supreme Court
  • The Prime Minister has not been included under the purview of the Lokpal – he can be investigated only after he demits office.

    Setting up of different agencies to tackle public grievances while supporting a stronger judicial accountability bill to deal with corruption in judiciary has been envisaged.

REACTIONS ON THE DRAFT

Though the draft has been brought out, people are still not contented with the conditions laid down therein. The draft has once again brought Anna Hazare, the crusader of anti corruption to stand against the government. Exclusion of the Prime Minister from the ambit drew sharp reactions from Hazare. He said that he would again stand out against this on August 16 at Jantar Mantar. “This is not Hazare’s protest but entire country’s” added Anna. He has asked the people to get ready for the second fight and get out on the streets in a round for protest. His associate Arvind Kejriwal said Hazare will demand withdrawal of the bill cleared by the Cabinet and seek a stronger law in place of the bill.
Lawyer Prashant Bhushan also seems to be discontented as he said that the five senior ministers who were part of the joint drafting committee had displayed “total illiteracy” of constitutional law. “This bill will be struck down by the Supreme Court within a minute if they give immunity to Prime Minister,” he said. Even political parties joined the criticisms with the BJP General Secretary, Ravishankar Prasad, saying that even the PM should come under the Lokpal. CPM leader Brinda Karat also questioned the exclusion of the PM. “We don’t understand why because since 1989 every single proposal had prime minister’s office in the lokpal bill,” she said.

On the other side, in order to defend, Law Minister, Salman Khurshid said, “I am surprised that they (Hazare team) don’t recognize the good work they have done themselves, but just criticize us.” He said 34 of the 40 principles suggested by Hazare team have been accepted by the government.

WHY IS LOKPAL BILL SO IMPORTANT?

Jan Lokpal bill is a mean to bring an end to corruption. Several drafts have been proposed uptil now yet there are general clauses that can benefit the common people and the government. Under the bill, corruption cases can be registered and even prosecute politicians and bureaucrats can be investigated without seeking government permission.

The bill can be completely transparent as Lokpal will be completely different from the government. Hence no minister or bureaucrat can influence their investigations. If implemented properly, cases will not linger in court for years. However, at the time of conviction, even the loss that has been caused to the government can be recovered.

It will be of immense help to the common people as they can directly file a complaint if their ration cards or passports are not being made, or if someone asks for a bribe and even if the police reject to file the case.

Even in terms of execution, the administration will be transparent and the Lokpal will be terminated if any complaint is received against him. However even the people raising their voice against corruption will be protected by the Lokpal.

Now as some initiation has been taken by the government, it needs to be checked whether the clauses framed are helpful to the common man or are just an eye wash.

AN ADDITION IN THE HISTORIC INDIAN CURRENCIES


 

The place of 25 paise coins have been shifted from market to your coin collection book. RBI has notified that 25 paise coins will no longer be a legal tender from June 30. Arrangements were made for people to exchange these coins for their face value at all RBI branches and other forty five banks maintaining small coin depots and notified by RBI.

With this, many middle aged people are brushing upon the days when 25 paise could fetch too much. Considering the inflation and constant devaluation, the decision is not much of a surprise. Some of the shops had already stopped accepting these coins months ago. With this, 50 paise coins will be the only ones having a decimal value.

25 paise coins were introduced in 1950 along with the decimal coinage system in the country. According to the RBI sources, the first RBI coinage was introduced on August 15, 1950 where the British King’s image was replaced by the lion capital of the Ashoka Pillar. Corn sheaf was replaced the tiger on one rupee coin. The other coins also underwent a transformation and carried Indian symbols. During the coinage system one rupee was divided into 16 annas. Later 25 paise coin was launched in place of ‘char aanas.’ The Indian Coinage Act was amended in 1955 to adopt a metric system for coinage. The Act came into force in 1957. The rupee was divided into 100 ‘paisa’ instead of 16 annas. The new decimal paisa was termed ‘naya paisa.’

Initially metals like bronze, nickel-brass, etc were used in making the decimal coins. Later, these were changed to aluminum. Lately, it was observed that the cost of minting the coins is higher than their face value. Hence coins of 1 paisa, 2 paise and 5 paise were discontinued. In 1980’s stainless steel coins of 25, 50 and 1 rupee coins were introduced. Slowly and gradually even 10 paise went out of circulation in the market.

BANNING 500 AND 1000 RUPEE NOTES

After banning 25 paise coin from the market, we need to see whether banning 500 and 1000 rupee notes is logical or not. In Baba Ramdev’s protest against black money and corruption, he demanded the government to ban Rs. 500 and Rs. 1000 notes in order to curb the corruption that has spread across the country. Baba Ramdev said, “If the ban is imposed the wealth accumulated by the corrupt people will come out in the market.”

The demand of Baba Ramdev did not find any support from bankers as they do not feel that the demand is feasible. According to data from RBI, of the Rs 7,88,299 crore currency in circulation, 76% is in the form of Rs 500 and Rs 1,000 notes. When it comes to numbers, these two notes comprise of 17% of the currency notes. However, if these two notes are withdrawn, the cost of printing notes will go high creating a chaos in the economy.

You might have observed that whenever you punch an ATM card, the maximum notes that an ATM throws are of 500 and 1000. If these notes are withdrawn, ATM will hold less than a fifth of their current capacity. However, even the cost will rise causing an inconvenience to customers. Moreover, the customers will not be able to withdraw more than Rs. 5000 at one punch because an ATM can throw maximum 50 notes at a time. The ATM will have to be filled several times a day which will affect the customers.

Moreover, some women feel that instead of 25 paise coins, RBI should ban Rs. 2 coins as some vendors provide unwanted items like candies due to lack of change. On the other hand some chemists also will be unhappy with the decision as there are some pharmaceutical companies that do not provide medicine in round figure. At such a point of time, 25 paise play an important role.

……….and the pen was made silent


The greatest weapon of a reporter is his pen. It is a journalist who brings out many hidden truths and helps in the welfare of the society. The pen of a reporter brings out the unknown facts in front of the people. Hence it is rightly said that a pen is mightier than the sword. But since a decade, journalists are being attacked as they hamper the activities of the wrong doers.
Once again the deliverer of truth was laid on death bed. On June 10, Saturday, a senior journalist, Jyoti Dey (56) of Mid Day, an English Daily was shot dead by motorcycle born shooters in Mumbai. He covered underworld and crime stories for over two decades. He was the head of the crime bureau of the newspaper. Just like every reporter Jyoti was on field when, four unidentified bike-borne persons fired five bullets on Jyoti. In broad daylight he was shot in Hiranandani area of Powai. According to postmortem report, he was shot from close range with five bullets on the left side of his chest and one on his right shoulder. Out of total five, Dey’s body had four exit wounds. He was rushed to Powai Hospital and later at Hiranandani hospital where he was declared dead.

Dey was cremated on Sunday at Ghatkopar. It rained heavily on that day and 200 of his friends and colleagues thronged his place to bid last good bye to their beloved friend. Every auto driver knew where to go the moment someone said Amrut Nagar. Maharashtra PWD Minister Chhagan Bhujbal and a large number of media persons also had turned up to pay their last respect to the senior journalist.
Just a day after the attack, Maharashtra Chief Minister, Prithviraj Chavan called an emergency meeting and asked the police to probe into the case and book the culprits at the earliest. The police have not come up with any names so far but are suspecting oil mafias as the journalist had covered a lot about them. Dey has also written a lot about Dawood Ibrahim, Chhota Shakeel, Chhota Rajan and others for a long time. Moreover, four teams have been formed by the Crime Branch to look into the matter.

Are journalists really safe?

Are you a journalist? A crime journalist? If yes, then be caredul while doing your stories as negative stories may have negative effects. Since a decade throughout the world, journalists are being attacked. India has also seen the journalist killings since long with Dey’s murder being an add on. Recently ‘Impunity Index’ was prepared by an international media watchdog on the basis of unsolved murder cases. The index includes countries with five or more journalist murder unsolved cases. Thirteen countries have been involved considering a period between 1st January 2001 to 31st December 2010. Cases were considered unsolved when no inferences were made. Murders make up more than 70 per cent of work related deaths among journalists across the world, according to CPJ.

India is at the 13th spot with seven such instances, or 0.006 unsolved journalist murders per one million inhabitants. The index is calculated as per each country’s population. Iraq tops the chart with 92 unsolved cases but it does not include cases where journalists were killed in a combat or while carrying out dangerous assignments like covering street protests. Philippines ranks second in terms of the number of unsolved cases being 56. When compared with the overall population of the country, Iraq remains at top followed by Somalia, the Philippines, Sri Lanka and Colombia. Pakistan and Bangladesh are on the 10th and 11th position respectively. Sri Lanka, Afghanistan, Nepal and India are also included in the list.

Is India really free and safe?

Media is like a backbone of the society. It brings good deeds and misdoings in front of the society. It provides the details which the common man would never have known otherwise. The crime reporters especially put their life at risk in order to show the true side to the people.

The attack on Jyoti Dey has drawn a line of caution on every reporter. The incident poses a question that is India really safe? These days’ journalists are shot in broad daylight. Does Dey’s incident point a finger on the security of a common man? Do journalists require proper protection? Is there any underworld or political agenda attached to these killings?

Fearless people who bring truth in front of the society are being killed for spreading truthfulness. The incident has brought forward the issues of governance, law and order and the security prevailing in the country.

A DAY IN THE SEVICE OF NATURE IS THE DAY IN THE SERVICE OF MANKIND


Tall buildings, huge industries, bridges, dams, wide roads, costly cars are given the name of development. This development results in smoke, garbage, pollution and increasing temperature. For this development, we are harming the environment day by day. Deforestation has created alarming problems for the world. Green forests are cut down just to build concrete jungles. This is at the cost of mother earth.

Since a few years, due to the drastic effect of global warming, the world has become a bit conscious about the natural environment. Countries of the world are coming together to solve glaring environmental problems. June 5 is a day which is dedicated for environment and is celebrated as the ‘World Environment Day’.

• WORLD ENVIRONMENT DAY

Due to urbanization, the world started facing major environmental problems. In order to draw the attention of various countries and to start serious actions on environment preservation, United Nations organized an international conference. The United Nations Conference on the Human Environment was held on Stockholm, Sweden from June 5, 1972. United Nations for the first time had organized such a major conference to discuss international environmental issues. This conference is regarded as the turning point in the development of international environmental politics. It was a day when for the first time on such a large scale nations got together to discuss the environmental problems. Hence, June 5 is celebrated as the ‘World Environment Day’.

Aim behind celebrating the day

World Environment Day, for the first time was celebrated in 1973. The day is a principal vehicle through which the United Nations stimulates worldwide awareness of the environment.
The aim of the day is to:-

  • Give a human face to environmental issues
  • Empower people to become active agents of sustainable and equitable developments
  • Promote an understanding that communities are pivotal to changing attitudes towards environmental issues
  • Advocate partnership which will ensure that all nations and people enjoy a safer and more prosperous future.

World Environment Day is celebrated every year throughout the world. Each year, a new theme is chosen for celebration. Each year UNEP (United Nation’s Environment Programme), the agency responsible for coordinating World Environment Day, selects a city as the main venue for the international celebrations. Grand celebration covering all environmental problems takes place. The theme is commemorated with an international exposition in the week having June 5.

The first ever theme in 1974 was ‘Only one earth’. Since then, every year new themes of environment are selected and the core idea of celebration rotates around the theme. Themes like ‘Green cities’, ‘Melting Ice -a Hot Topic?’, For life on Earth: Save our Sea’s’, ‘For life on Earth’ etc were the various themes that were followed during the previous years.
In many countries, the event is used to enhance political attention and actions on environment. Serious decisions are taken which lead to the establishment of permanent government structure dealing with environment management. Many a times, international environmental conventions are also rectified.

WORLD ENVIRONMENT DAY 2011

On February 22, 2011, UNEP announced that this year one of the fastest growing economies in the world which is embracing the transition to a green economy will host the celebration. India for the first time ever will be a global host for World Environment Day 2011. This year, the theme is ‘Forests: Nature at your service’. The theme highlights the importance of forest. It accentuates the variety of life sustaining services that forests provide. It brings an awareness to take action to protect the forest resources and move towards a green economy.
The theme is really complementary to India as 20% of the geographical land in India is covered by forests. Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: “Over close to the 40-year history of WED, India’s cities and communities have been among the most active with a myriad of events undertaken across the country each and every year—so it is only fitting that this rapidly developing economy is the host in 2011.” Increasingly it is at the forefront of some of the ‘green shoots’ of a Green Economy that are emerging across the globe,” he added.

Celebrations in India on June 5 will be a part of thousands of environmental activities going around the globe. Variety of activities ranging from school tree-planting drives to community clean-ups, car-free days, photo competitions on forests, bird-watching trips, city park clean-up initiatives, exhibits, green petitions, nationwide green campaigns etc. will be carried out on that day.

Last year, in 2010, unprecedented success was observed from the countries of the world. Last year, 112 countries registered activities on the WED website and WED was thrust into the blogo-sphere with the first-ever WED- blogging competition. Observing the response from the countries, this year UNEP is trying to make the event even bigger.

ENVIRONMENT AND INDIA

India is second largest populated country in the world after China. Increase in population, also results in the increase in pollution. India is facing several environmental problems like deforestation, pollution, loss of water resources and wildlife trade. Moreover India is also facing the problem of soil degradation. The coastline of India is suffering due to the environmental sabotage.

India has been alarmed about its environmental issues and it has been taking actions on these problems. The very first step regarding the environment was taken in 1927 by the Britishers by passing the Indian Forest Act for the protection of the reserved forests, protected forests and village forests.
Later in 1972 considering the wild life of the country wild life protection act was passed by the government. Many national parks and wildlife sanctuaries were developed for the protection of the forest animals. Also many resolutions were passed into the Forest Conservation Act in 1980 which signified the central government’s determination to take effective steps to protect the environment.

These days, not only the government but the citizens have become responsible and cautious and have joined the green drive. Many NGOs are set up that work on various issues of the environment. Even children are sensitized towards the environment and greenery. Over the years, severe harm has been caused and only collective and sincere efforts can help ensuring a green future to mother earth.

HITTING CRUDE PRICES HEATING THE ECONOMY


 

These days all golden commodities like petrol and gold have taken the name of wealth. That is the reason behind the flourishing economy of the gulf countries.  Since 5 years, the price of almost all the commodities has been raised considerably. Above all, the price of petrol has shown a sharp rise leading to a subsequent increase in the price of other commodities. The world has been engulfed into the clutches of this price climb. Almost everywhere the prices of petrol are significantly being raised. Recently, Indian government increased petrol prices by Rs. 5. There are several questions in the minds of the people like do we blame the government? Do we call it international politics? Or do we call it a game of demand and supply? An organized and methodical research has to be carried out to get answers to all these persistent questions.

ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) 

OPEC was formed with an object to stabilize and uniform petrol prices for the benefit of the member countries. Over a period of time OPEC has secured an efficient, regular and economic supply to the consumers. It has also worked for the fair return of the ones investing in petroleum industry.
The organization was formed in 1960 in Iraq, member countries were Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Qatar, Indonesia, Libya, UAE, Nigeria, Algeria, Ecuador, Gabon and Angola later joined the organization. With a passage of time, some suspended the membership while some were terminated by the organization. At present there are twelve member countries.
OPEC’s influence on the market has been largely criticized since it became effective in determining production and pricing. Moreover, OPEC’s ability to control the prices has been affected since the subsequent discovery of large scale petroleum in Alaska, the North Sea, Canada and the Gulf of Mexico. The ease of trade in Russia and the market modernization has also influenced OPEC to a certain extent. The organization faced several downturns but over the years, it did bring back the returns and stability in prices for the member nations. It faced severe problems after 1973, but after 2005 the price of oil again started to shoot up. Hence even the number of member countries increased.

PETROL PRICES ACROSS THE WORLD

Though oil prices are found almost similar in all the countries, there is a little variation observed in the prices of member countries and non member countries.

COUNTRY PETROL PRICE IN RUPEES IN 2010
Venezuela 0.93
Saudi Arabia 7.47
UAE 17.28
Egypt 22.88
USA 26.15
Australia 34.55
Canada 35.49
Pakistan 39.22
South Africa 40.62
Bhutan 42.49
China 46.23
Afghanistan 49.03
India 50.90
Bangladesh 54.63
Brazil 58.83
United Kingdom 67.24
France 70.97
Germany 72.84
Italy 73.31
Cuba 77.98
Eritrea 118.14

As per the above table, petrol is the cheapest in Venezuela, a member country of OPEC and is expensive in Eritrea. Petrol price in India were near the world average that is 51.83 in 2010. During the last two decades India has seen a major escalation in the price of petrol due to sales tax revisions, increase in the retail price of crude oil and increase in local levies. From 2000 to 2005, petrol prices showed a steep increase. In the year 2005, petrol prices increased twice and petrol prices almost touched Rs. 43.5 and the price of diesel also increased considerably.  From 2005 to 2010 petrol prices were raised by Rs 15 and diesel roughly by Rs 9.03.

At present the petrol price has increased. The government is claiming that the oil producing companies are suffering from heavy losses and thus the increase. This year, since January there has not been an increase in the price of fuel, but immediately after the state elections the prices were raised straight away by Rs. 5 bringing a cruel blow on people. The sudden increase in prices resulted into a strong reactions from the opposition and also from the people.


FACTORS AFFECTING PETROL PRICE

When fuel prices rise, it is not only due to the rise in the price of crude oil or the import duties but several factors are responsible for a price hike.

Cost of crude oil

Increase in the price of crude oil in international market affects the domestic market of fuel rates in the country. Increasing international demand, low rate of production or political disturbance in oil producing countries leads to crude oil price rise. It was announced by OPEC that the member countries would reduce their output. Reduction in output and an increase in demand raised the crude oil rates in the market.

Supply-demand mechanism

For any commodity, if demand increases and supply decreases it automatically leads to inflated prices. Same is the case with petrol. The demand of petroleum products has shown a huge increase in India and Asia which subsequently lead to expensive petrol.

Exchange rate

India is an importer of petrol hence the exchange rate also plays a part in the fluctuation of prices. Petrol prices are determined by US dollars in the international market. If rupee gets appreciated, the exchange rate goes down. This may lead to a fall in import prices.

Taxation

Taxes play an important part in determining fuel prices but it varies from product to product and country to country. It varies on local government policies in imposing taxes on fuels. If government of India increases the taxes on fuels, then the oil companies have no alternative other than raising the prices in order to save themselves from huge losses and to maintain marginal profits in oil business in India.

Other factors

Apart from these factors, local market conditions that include demand, supply, competition and government regulations can also have an impact on the petroleum market. It also depends upon the geographical location.

In India rising demand and taxation are the main factors behind the current situation.

DEREGULATION OF PETROL PRICES IN INDIA

In India, the factor that is playing a part in the inflated prices of petrol is the deregulation of petrol prices. In June 2010, the empowered group of ministers (EGoM) decided to deregulate the prices of petrol. As per the decision, the petrol prices started to be determined as per the market forces. The step was taken so that the government could shrink its budget deficit and help state run marketing companies to recover losses. As a result of the decision, private players like Reliance, Essar, etc compete with state run firms for retail market share.

Effects of deregulation

Deregulation leads to increase in petrol prices which in turn lead to price rise of other commodities creating inflation.

Higher inflation also increases the cost of borrowing that leads to higher interest rates.

The private sector oil companies and oil marketing companies will raise their margins. Due to deregulation even a single petrol pump owner can enter into hedging that leads to more and more rise in the price of petrol. Hence, deregulation is costing heavy on the pockets of the people as the prices of all the commodities are rising without an increase in salary. As a result, marginal fall is observed in short term savings.

This does not affect the niche class much but it gives a heavy blow to the middle class. As and when the private players ignite the prices, the middle class catches the heat.

EFFECTS OF PRICE RISE

Petrol can be said to be in the center of the economy. Slight rise in fuel prices leads to rise in price of almost all the commodities that gives a big blow to the society. If petrol prices rise, then the cost of transportation rises. Cost of transportation is included in almost all the commodities that we buy like milk, vegetables, pulses etc. The cost of production also increases and hence the rate of the final product has been raised by two or three times. For example, if a manufacturer wants to produce a cloth, he will have to buy cotton from a farmer. Due to rise in petrol prices, the farmer will sell cotton at a higher rate. Hence the cost of production for the manufacturer will increase. Hence he will add his profit into it and sell the material to the whole seller. The material will be a bit costly for the whole seller who also will add his amount of profit and sell it to the consumer. The whole seller and retailer will add both the transportation cost and the profit. Hence the consumers will get a harsh blow on their pockets even due to a slight rise in the price of fuel.

This leads to inflation. Expectations of high future inflation can cause workers to demand more wages, setting in motion wage-price spiral, or high wages causing increased demand and pushing up inflation, leading to demand for yet higher wages. Hence, the vicious circle continues.

 

 

 

 

 

 

 

 

OIL AND INTERNATIONAL POLITICS

Since ages the issue of oil has been covered by international politics. Oil is such a source of energy that any small change in the price of oil attracts the eyeballs world over. With the consumption increasing, all countries have their eyes set on the oil producing countries. Every country tries to get the resource at cheaper rates.

With the increase in the price, other countries have to pay according to the dollar rate as it oil is priced in dollar into international markets. Hence, it becomes a bit cheaper for the United States as it does not have to face the problem of exchange rate that sometimes makes oil costlier for other countries.

How did dollar become the oil reserve currency?

After World War II, United States became the strongest economy in the world. It produced half the world’s coal, two third of oil and half of the electricity. Hence it could easily get out of the aftermaths of the war. European nations involved were deeply indebted to the U.S. and transferred large amounts of gold for repayment. At one point, the U.S. vaults contained an estimated 80% of the world’s gold.

The countries of the world agreed for a new monetary paradigm where they decided to make the US dollar to be the reserve currency of the world.

Another turn took place after 1967 war when the Arab countries got separated from OPEC and formed a separate group called Organization of Arab Petrol Exporting Countries (OAPEC). The move had political intentions. The purpose was to unify the policies and exert pressure on the west over its support of Israel.

In response to US support of Israel, the Arab members of OPEC led by Saudi Arabia decided to reduce oil production by 5% per month. Over and above, Saudi Arabia declared an oil embargo against US. Later, the embargo was extended to the Netherlands, Portugal, Rhodesia and South Africa. The embargo lasted for a year but Libya continued its embargo against United States. These reasons not only had an impact over the oil prices but also struck the economies of the west and the Arabs.

The fight for oil is also going on at present with countries trying to come up with new moves and policies that might help them to get oil at a cheaper rate. Recently, many oil producing countries faced political imbalance that disrupted the peace of those nations. The United States intervened and brought the matter to a silence. This might help the US to obtain petrol at lower rates. US can cut on its cost to a great extent as it is the largest consumer of petrol in the world. This can also help US to give a strong fight to China, Japan and India in becoming the super power.