Well begun, half done

On Thursday, Petroleum Minister Veerappa Moily said that the government had decided to allow the oil marketing companies to raise the price of diesel in small amounts, in order to reduce the losses OMCs make on selling the refined fuel. Those losses, or “under-recoveries”, are of course eventually covered partly by the central government, and are the most potent contributor to India’s problems with its fiscal deficit. It has been known for a long time that the first step towards fiscal consolidation, and thus to healthy public finances and a more stable macroeconomy, was to decrease the subsidy amount spent on diesel.

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