Question

how does the APM affect the government revenue?

Answer 1

the dismantling of the administered pricing mechanism has been eagerly awaited for a while. from april 1, 2002, the pricing of petro products would be determined by market. but cheaper petrol and diesel is still a long haul. however, for the common man, hopes of cheaper petrol and diesel can evaporate over the next few months because of a sustained rise in the price of oil, which has been on the upswing for a while. indeed far from falling prices, there could be a higher outgo from the consumers pocket. the only measure of relief here could be in the form of government tinkering with duties to ensure that prices do not spiral out of control. while this would affect the governmenta™s revenue projections, rising oil prices are a major cause for concern across the world. the biggest worry is economic recovery in several countries in the west may be affected by the rising oil prices. just when things are looking up and the outlook is improving, policymakers are afraid that higher oil prices could slow down economic recovery across several countries in the world. on the domestic front, it would be an entirely new ball game for the consumer because suddenly the value of crude prices and an understanding of the way in which the pricing formula is worked out has becomes very important for him. this is a sharp change from the current position where the consumer is more or less insulated and the main areas of the economy which are affected are the value of oil imports, collection of customs revenue and consequently the position of the oil pool account. over the last few months, there has been a gradual rise in the monthly average price of crude, which can be seen by the u-shaped price curve. the price currently rules in the range of $24-25 per barrel. the main reason being attributed for this is the threatening rhetoric by the us and uk against iraq, which, many believe, could lead to conflict. according to deutsche bank analyst al stanton there is a war premium because of iraq and the ensuing demand supply balance. at the same time, the organisation of petroleum exporting countries (opec) has decided to maintain the current cuts in oil production for another three months. the opec decision is expected to strengthen rising oil prices. according to the international energy agency (iea), the opec members with quotas pumped 22.44 million bpd in february 2002, 390,000 bpd lower than january levels, but still 740,000 bpd over their official target. of the other countries that promised cuts, norway reduced supply in february by 110,000 bpd, mexico by 100,000 bpd and oman by 40,000 bpd. angola and russia were the violators in the list. the international energy agency says that russiaa™s combined output of oil and natural gas actually climbed by 20,000 bpd last month from 7.27 million in january. on the demand front, the international energy agency , in ita™s last monthly report, has cut the forecast for global demand growth for oil this year by 16 per cent. the international energy agency has cited a lower than expected economic recovery, which, in turn, reduces the demand for oil.