The flaw in Dual Pricing

Surely, those rooting for dual pricing can learn something from the market differentiation that was tried for kerosene — one price for that supplied through ration shops, and another for the open market. When there were leakages from the first to the second (as a school student would have forecast), the subsidised kerosene was given a special colouring but that seemed to make little difference. Even in the case of cooking gas, it is well known that many subsidised gas cylinders meant for the home market end up in the commercial market.

The obvious question is why the government thinks that dual pricing and segmented markets will work in the case of diesel. Bear in mind that a substantial part of the diesel sold in the country is already adulterated with kerosene, and that a great deal of the petrol too is adulterated (remember the ad campaign by an oil marketing company, guaranteeing pure fuel at select petrol pumps). In a market prone to such rackets, dual pricing is something that should never be tried.

- Business Standard Editorial; 'Try a better option'.


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