What could go wrong if petroleum product prices are decontrolled?

During the 1991-1994 the oil prices were very stable and that actually helped us to implement liberalization quite easily (refer Indian Economy by Misra and Puri Chapter 60). Thus oil prices play a very important role in implementing economy reforms also. If oil prices are not decontrolled then it would be subjected to high fluctuations which will not only impact the poor people but also small and large enterprises and stock market. This may bring instability in the economy. By decontrolling the prices we will expose economy to high risk. The prices of commodities will also fluctuate and and may lead to inflation. Also there seems to be no incentive for decontrolling the oil prices as the extra burden that government is bearing will be passed to people and eventually will decrease the purchasing power of people and thus savings and investments resulting into back-fire to government.

hey guys...i found a nice PDF on net about the Kirit Parikh Committee recommendation...do have a look..

Click here

Any comments invited.

-Ami

To understand the concept of Deregulation in Oil you can read this PDF. Nice one giving major points in brief.

-Ami

Another link for reference:

Oil Deregulation