Prof. J.D. Agarwal, Chairman, Indian Institute of Finance welcomed the decision of the Ministry of Oil and Petroleum, Government of India to allow the revision of the prices on fortnightly basis within a band of 10%. This would help a market mechanism to be evoked and adjust for volatility in the international oil market and help oil companies perform profitably. However, in his opinion 10 % band on either side is too high. If it is to be on fortnightly basis, it should have been between 5 % to 7 % opines Prof. Agarwal.

According to Prof. Agarwal, 80 % of the consumption of petrol is done by the Government and the Government related organisations. 60 % of tax collected on petrol by way of taxes is a mere transfer of funds from government to government through the oil companies. He feels that the adjustment with respect to tax collection and tax charged requires adjustment so as to remove such anomalies that help to bring greater level of efficiency.

Dr. Agarwal strongly urges that the Government should, while resorting to market mechanism, develop a oil pool reserve which is to be used to bring stability in the retail oil prices since volatility in the oil prices is too high and beyond 10 % band so as to mitigate the hardships faced by the people of the country and keep inflation under control.