India Warns They too Cannot Subsidize Energy Costs Forever

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. (scary - no wonder there is no demand destruction)
• Policy makers were expected to agree on a package for oil firms -- including a moderate rise in prices of petrol and diesel -- at the weekend, but their efforts have been complicated by fears of upsetting voters in an important election year. (some things never change, no matter what country you are in)
• The oil ministry has suggested price rises of 15-20 percent and officials have described a hike as "inevitable", but any increase is likely to be far lower given the potential fallout for the ruling Congress Party-led coalition and inflation fears.
• The prime minister said fiscal steps taken by the government to tame inflation -- at its highest in more than 3-½ years at an annual 8.1 percent in mid-May and stoking fears of more central bank action -- would yield results. (keep in mind India has been growing 9-11% so 8.1% inflation in a 10% growth world is at least break even... meanwhile in the lovely states we have shoddy growth with arguably 8-14% inflation... err, I mean 3.4% inflation ... with lots of growth.... in the 2nd half)

Bloomberg: India Can't Allow Subsidies to Increase

• ``Petroleum prices don't reflect world trends,'' Singh told the Associated Chambers of Commerce and Industry in New Delhi. ``This situation cannot continue for ever. We need further political consensus to adopt more rational economic policies.''
• Singh is under pressure to increase gasoline and diesel prices to alleviate shortages and narrow refiners' losses from $1 billion a week. He hasn't raised prices in the past 3 1/2 months on concern it may accelerate inflation, already the highest since 2004, ahead of national elections in a year's time. (and you though Valero (VLO) was having a tough time of it)
• Cooking gas prices have been capped since April 2005.
• India's communist parties, whose support helps Singh's maintain a majority in parliament, said May 31 they won't allow the government to raise prices. The communists said the government should instead cut import and excise taxes on fuel.
• Indonesia raised fuel prices by an average of around 29 percent on May 24, the first increase in three years, to cut subsidy costs.
• In China... the government controls prices of gasoline, diesel, jet fuel, coal and power.
• China Petroleum & Chemical Corp. was paid about 7 billion yuan ($1 billion) in state subsidies for oil imports in April, more than what it got for the whole of last year, according to a company official. China controls fuel prices to limit their effect on inflation, which is running near a 12-year high.

Inflation here (ok not here, we have no inflation)... inflation there... inflation everywhere (except for the U.S.). It appears if true market prices were being paid, we'd have a global consumer recession, not just an American/British/Spanish one.