Congress ally DMK promises to let government set petrol, diesel and cooking gas prices if voted to power [Video]

One of the many promises is to bring petrol, diesel, kerosene and cooking gas back to the ‘administered price mechanism’ (APM). It means that the government would set the prices of these commodities instead of the process being determined by market forces like demand and supply.

From 1975 to 2002, petroleum products in India were under the administered price mechanism. From April 2002, the government moved on to the subsidy system whereby retailers like Indian Oil, Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) would be compensated for any subsidy incurred in selling petrol, diesel and kerosene.

India imports more than 80% of all the crude oil it needs to produce end products like fuel.  In the case of liquified petroleum gas, which goes into cooking gas cylinders, the imported quantity is more than 55% of the demand.

As the subsidy bills surged along with the international price of …