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Economic Highlights
UPA Skids On Messy Oil:TIME TO DRAW LAKSHMAN REKHA, by Poonam I Kaushish, 7 June 2008 |
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POLITICAL DIARY
New Delhi, 7 June 2008
UPA Skids On Messy
Oil
TIME TO DRAW LAKSHMAN REKHA
By Poonam I Kaushish
Go on failing. Go on. Only next time try to fail better.
Samuel Beckett’s saying encapsulates the fallacy of the UPA sarkar. How it continues to flunk in
providing good governance. Content
only in making appropriate noises, expressing hollow concerns but offering no
solutions to end the agony of the aam
aadmi over soaring prices, still higher inflation and rocketing oil. Which
have trashed all hopes of a better tomorrow. Yet for our netagan, India
is Incredible!
So busy rejoicing over Brand India, that they forget the ugly
reality of Asli Bharat. Amdaani athanni,
kharchaa rupiya…baaki jo bachaa who mahengai maar gayee!. This, my dear
readers sums up the tragic reality of the aam
aadmi under the UPA. Forget bijli,
sarak, paani there is no sight even of the much promised roti, kapada aur maakan for the 800
million poor who satiate their hungry, malnourished bellies feeding on the neon
signs of Coke that mock their poverty. Mera Bharat is indeed Mahan!
Don’t worry and lose sleep we have taken stern action to
bring down the prices. The inflation rate could already be tapering off, cooed
our erudite Finance Minister Chidambaram three months ago. Today, he has
helplessly thrown up his hands and sings another tune, “There is yet no sign of
a decline in the inflation rate. We do not know if we have peaked yet.”
If this spelt bad news, worse followed. The Prime Minister
Manmohan Singh went on national TV and radio to announce a steep hike in
petrol, diesel and LPG prices last week. Hoping to play the heartstrings with a
plaintive plea, “With a heavy heart I am compelled to say inflation is
inevitable due to rising global food and commodity prices and oil prices…we
have to tighten our belt. We cannot think only for ourselves, for the present,
for the here and now. We must think about what is good for our children, grand
children and their children. It is our duty to ensure food and energy security
for an India
where the aam aadmi feels safe,
secure and hopeful about the future.”
Are we expected to applaud? Sing paeans of the Government?
Let’s talk real. Has anyone bothered to study the end result of any price hike?
Can it be counted upon to keep the total deficit in check? No. On the other
hand, the actual impact, working through a multiplier effect, is always far
greater than the direct increase estimated by the Government’s go up. An increase
will not only make life difficult for the vulnerable citizens but also trigger
off a cost-push spiral. Every one knows that any attempt to control deficit
financing through increase in prices of essential commodities is at once
dangerous and suicidal, both economically and politically.
The price hike would also raise the inflation rate. In real
terms, this mans that the purchasing power of the rupee would decrease and the
interest rate would have to be increased. This would curb growth rate and lead
to a fall in the demand for manufactured goods. All the Government has done is
changing the gears of tokenism.
Besides, this is loads of economic gibberish which the 762.9
million people earning less than Rs 20 a day don’t understand and couldn’t care
less about. Questionably, which future tabbar
(family) is the Prime Minister promising a better future for? The 74 million
‘Nowhere Children” who are neither enrolled in schools nor accounted in the
labour force or the 44 million children aged between 5-14 years engaged in
economic activities and domestic and non-remunerative work?
Needless to say the economic policies of the UPA Government,
far from being able to address the central problems of inflation, agrarian
crisis and unemployment are adding new ones for the Indian economy.
Disillusionment among the aam aadmi whose
aspirations were raised with the UPA’s coming to power, is fast turning into
discontent. Borne out by rising farmers suicides, despite doles by the Prime
Minister, chakka jams and bandhs. Even the National Rural
Employment Guarantee Scheme is mired in corruption wherein the benefits are not
accruing to the end user.
The tragedy of India is that it is being ruled by
leaders who are stricken by reckless populism and crippled by a crisis of casualness.
Who seem to be good enough for only fair weather governance. Even the slightest
turbulence causes panic. So comatose are they that they refuse to see the
writing on the wall and merrily continue to make mistakes.
So what if sound economics adds up to bad politics and
deficit populism. Over the years, our netagan
have turned this dictum on its head and converted populist politics into
economic nonsense. Prime Minister Manmohan Singh’s Government is no different
from that of its predecessors. The issue is not about the price hike of petrol
and petroleum products. It is about the manner in which the oil crisis is
handled.
Think. Over 70 per cent of India’s oil consumption is by the
Central Government and its counterpart in the States. Ministers both at the
Centre and States get many cars allotted to them with unlimited petrol. An
example: A Central Minister used to drive to his residence every time he wanted
to go to the toilet as the washroom in his Ministry was not up to the standard!
The MPS and MLAs are not far behind. They get various Public
Sector Undertakings to assign cars to them. Not to forget the babudam. The Joint Secretary and above
at the Centre are entitled to an official car round the clock. Used to ferry
their wives to her kitty party and shopping and drop-pick up the children from
school. Unlike in the past when even ICS Secretaries used to drive to work in
their personal cars and used official vehicles only for office work. Before
telling the consumer to curb oil consumption, the Government should first
strictly ration its own consumption.
To show that his Government means business, the Prime
Minister talks austerity and shoots of a letter to all his Ministerial
colleagues to desist from wasteful expenditure. ''It is a moral duty to cut
down on wasteful expenditure. I'm asking you to severely curtail spending on
air travel, particularly foreign travel, unless absolutely necessary,” Only
three Ministers heed his advise and forego their annual summer chutti in foreign climes.
Till date the Commerce Minister Kamal Nath has made 72 trips
overseas till November last spending a total of 424 days outside the country,
the Minister of State for External Affairs, E. Ahmed went abroad 79 times and
spent 232 days there, others who follow suit were Renuka Chowdhary, Kapil
Sibal, Ramdoss and Ambika Soni. So much for austerity. It is another matter
that the Prime Minister conversely confessed that his sarkar indulged in lavish spending. Clearly Government money is
nobody’s money!
What next? The time has come to draw a lakshman rekha on populist measures. The Prime Minister should remember that
austerity measures and tightening of the belt flows from the top. Yatha Raja Thatha Praja. The buck stops
at our netagans doorstep. ---INFA
(Copyright India News & Feature
Alliance)
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Bush Attends Final EU Summit as President, by Dr. Monika Chansoria, 18 June 2008 |
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Round The World
New Delhi, 18 June 2008
Bush
Attends Final EU Summit as President
By Dr.
Monika Chansoria
Research Fellow, Centre for Land
Warfare Studies, New Delhi
President George W. Bush embarked upon a concluding visit to
Europe while in office, so as to attend his eighth and final European Union
(EU) Summit near the Slovenian capital of Ljubljana on June 10,
2008.
With a range of significant issues on the agenda, the summit
primarily remained focused on discussions regarding the contentious issue of Iran’s nuclear
pursuit and climate change.
On a rather reflective note, President Bush said, “My first
trip to Europe as President began in Slovenia,
and so does my last trip as President to Europe.”
The weeklong trans-Atlantic visit included the EU-US summit followed by trips
to Germany, Italy, the Vatican,
France, and Britain.
International concern on the ongoing turmoil with reference
to Tehran’s nuclear programme surfaced yet again
at the forefront during the summit with President Bush aiming to convince
member states of the EU to apply further effective sanctions against Iran.
This included crucial persuasion by President Bush to take
stringent steps to stop the flow of money through Iranian banks, which Washington believes are providing crucial funds towards Iran’s
controversial nuclear programme.
While speaking to reporters in Ljubljana,
US special envoy to the EU,
C. Boyden Gray said, “There are Iranian bank activities that could be curbed,
there could be further restrictions in compliance with resolution 1803,”
adopted in March by the UN Security Council to beef up measures against Tehran. Furthermore he
added, “Both sides must make sure there are no evasions whereby Iranian banks
can continue to do business to further this nuclear programme which I think we
all agree must be terminated.”
Washington desires the European Union to take
measures particularly against the Iranian Melli Bank by discontinuing its
branches in Hamburg, London
and Paris from
operating so as to stop the abuse of the international banking system to
support proliferation and terrorism.
Meanwhile, EU foreign policy chief Javier Solana indicated
that he would travel to Tehran shortly for talks aimed at convincing Iran to
suspend its uranium enrichment activities. However, Solana refused to give in
details saying, “We will have several meetings in Tehran with various people and we will see. I
am not going to speak now about the contents of the package.”
Reacting to this overture, Iran
gave its pre-emptive judgment of the deal that holds out the promise of
economic, technological, educational and political rewards—dead on arrival,
assuming the offer is conditioned on Iran halting its uranium
enrichment, which it is.
The Iranian sentiment was precisely demonstrated in the
statement by Iran’s
spokesman Gholam Hossein Elham to the official IRNA news agency, “If
suspension is included in the package, it won’t be considered at all. The
position of the Islamic Republic of Iran is clear. Preconditions can’t be
raised for any halt or suspension.”
These statements clearly indicate that the predicament over Tehran’s nuclear quest
would continue to remain extremely intense in the coming future.
Even though, Bush and his European counterparts announced in
a communiqué that they are prepared to go beyond current United Nations
sanctions to pressure Iran
not to develop nuclear weapons, what remains rather unclear is how far the
Europeans would echo President Bush’s tough rhetoric against Iran.
The communiqué from the US
and the 27 nations EU said Iran
must undertake a ‘full and verifiable’ suspension of its uranium enrichment
programme and must disclose any prior weapons-related work to the International
Atomic Energy Agency.
“Now is the time for there to be strong diplomacy. They can
either face isolation, or they can have better relations with all of us. We’ll
find new sanctions if need be,” Bush said after a meeting, appearing with
Slovenian Prime Minister Janez Jansa and European Commission President José
Manuel Barroso.
Moving over, the other crucial issue that took center stage
at the summit was that of climate change and global warming that has
incessantly been a sticking point of US-European relations.
The EU has pledged to slash greenhouse gas emissions by 20
per cent by 2020. Though Washington wishes
that any global agreement on climate change should include pledges by
fast-growing economies, such as India
and China
as well.
“I think that there is a growing recognition, not only in
the US, but in Europe as well, that in order for a new international
climate agreement to be accepted, it’s got to be both environmentally effective
and economically sustainable,” Dan Price, Deputy National Security Adviser for
international affairs said.
Significantly, amidst towering global oil prices and
worrying inflation, Bush expressed concern over the condition of the dollar and
promised to stress ‘our nation's commitment to a strong dollar’—with the White
House joining in with the Federal Reserve in calling for an end to the dollar’s
droop.
Before his arrival in Europe, President Bush gave a
statement in Washington
on June 9 where he reiterated, “The US economy has continued to grow in the
face of unprecedented challenges. We got to keep our economies flexible—both
the US
economy and European economies need to be flexible in order to deal with
today’s challenges.”
Crucially, the waning dollar is turning out to be a major
hurdle towards the recovery of the American economy given the high prices of
oil and growing inflation.
President Bush’s comments at the White House could well be
viewed as a reassurance to the European community that is ever more upset about
the condition of the dollar, particularly against the euro. The European
leadership has expressed concerns that a weak dollar is hurting their economies
in that Europe depends more on exports with a daily trade worth $3 billion with
Washington.
All in all, the EU summit was the very last of President
Bush’s visit to Europe, while being the President of the United States
and understandably, there was not any breaking announcement in the offing. The
trip was widely analyzed more as a valedictory one given that President Bush
would be making way for America’s new President come January, bringing an end
to a presidency that was marked by stern antagonism by many Europeans vis-à-vis
the US-led war in Iraq.---INFA
(Copyright,
India News and Feature Alliance)
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Pranab Visits Beijing:TALKS YIELD MIXED RESULTS, by Dr. Monika Chansoria, 11 June 2008 |
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Round The World
New Delhi, 11 June 2008
Pranab Visits Beijing
TALKS YIELD MIXED
RESULTS
By Dr. Monika
Chansoria
(School of International
Studies, JNU)
External Affairs Minister Pranab Mukherjee concluded a
four-day official visit to China
last week that witnessed both economic convergences and strategic divergences
at the forefront.
Expectedly, the interminable border issue between the two
countries was one of the prime subjects on the agenda between Mukherjee and his
Chinese counterpart Yang Jiechi, and both Beijing
and New Delhi
vowed to resolve it through productive means in the future.
Foreign Minister Yang Jiechi told his visiting Indian
counterpart that trade and diplomatic ties would keep improving with cooperation
between the two countries, whose combined populations make up a third of
humanity. The relationship is “at the best period of development in history and
faces important strategic opportunities,” official Xinhua Agency quoted
Yang as saying.
In response, Xinhua quoted Mukherjee saying, “We will
have to resolve these differences through negotiations in a constructive and
forward looking manner. We will have to be patient and realistic. Our boundary
is peaceful and we are determined to keep it so. We have evolved mechanisms and
have gained experience to maintain peace and tranquility in our border areas.
While we may have our differences, we will not let them become obstacles to the
broadening and deepening of our relationship.”
However, this optimism may not be read as very well rooted
in history given that as many as eleven rounds of talks on settling the dispute
have made scarcely negligible progress, since the mechanism of the
representatives of both governments was established in 2003. In 2005, both China and India
agreed on a set of political principles during the visit of Premier Wen Jiabao
to New Delhi to
guide both sides in the task of finding a mutually satisfactory solution.
Significantly, according to sources the Chinese leadership
brought up the Sikkim
issue as one the matters that remain to be settled. However, from New Delhi’s viewpoint, the Sikkim border ‘had already been
finalized way back in 1959 and there indeed was no dispute’ on the same.
Apparently, Beijing claims
that its border with Sikkim
has yet to be demarcated, though New
Delhi firmly believes in the contrary. The timing of
China bringing up the border issue at talks needs to be carefully scrutinized
in that Beijing appears to be playing the Sikkim card tactically with reference
to New Delhi and the latter’s firm rebuttal of the said issue makes it amply
clear that India is not willing to play into the hands of the Chinese.
Besides, Beijing claims India’s northeastern state of Arunachal Pradesh
while China occupies areas
that India considers parts
of its Jammu and Kashmir
region. In addition, New Delhi said the two
sides also agreed to exchange data on seasonal water flows in cross-border
rivers including the Brahmaputra, one of Asia’s largest rivers that originate
in Tibet.
In a significant speech to students at Peking University,
Mukherjee opined, “Today, both our countries require a peaceful external
environment. Therefore, we should work together towards peace, security and
stability in Asia and beyond. For this, we will
need to evolve a security architecture, which takes into account the conditions
prevailing in Asia.”
“An open and inclusive architecture, which is flexible
enough to accommodate the great diversity, which exists in Asia,
is needed. We already have some dialogue forums in place, such as the ARF, the
CICA and the SCO, where we are discussing security issues. As two major
countries in Asia, India and
China
should try to work together to evolve a new framework from these basic building
blocks,” Mukherjee added.
Moving over, palpably when India
and China
meet, there are bound to be substantial talks and discussions on the galloping
economic ties between the two. And indeed, this held true to the Indian
External Affairs Minister’s visit as well.
Crucially, the trade target of $60 billion set by the two
countries would be achieved well before 2010. Bilateral trade between the two
countries has already risen to nearly $40 billion, thereby making China the largest trading partner of India.
Mukherjee inaugurated the Consulate General of India in Guangzhou city of Guangdong
province. It was significant since it is in Guangdong,
where China’s
first special economic zone (SEZ) was set up. “There is tremendous interest in India to learn
from your experiences, including your remarkable success in developing the
Special Economic Zones,” Mukherjee said.
Apparently, the Guangdong
province accounts for one-third of China’s total foreign trade and
runs at the forefront of the country’s economic reforms. Moreover, China has earmarked six SEZs including the
entire Hainan province.
Guangdong Governor Huang Huahua stated that the inauguration
of the Consulate General of India would open a new chapter of friendly
cooperation between Guangdong and India. Trade
between the Province and India
amounted to $5.9 billion in 2007, an increase of 55 per cent over the previous
year.
At home, the Centre has been trying to convince critics of
its SEZ policy and has met with little success on the same. The UPA government seems
under tremendous pressure from the Left allies to amend its SEZ act and rules.
The Left parties have asked the government to learn from
China’s 20 years of experience with SEZs and have highlighted that these SEZs
are owned by the government while rehabilitation package is given to displaced
farmers including monetary compensation, provision for housing and employment.
Furthermore, China
has regulated the number of economic zones and set up these zones only on
barren land and along coastal areas.
In all certainty, the border dispute dating back to the 1962
war still festers and mistrust between New Delhi
and Beijing
never seems too far from the exterior. India’s
proposal for the new security architecture in Asia
also appears frail in the absence of a clear overview coupled with failing to
define the aims and objectives of the same.
This is well in contrast to India’s entry into the
“quadrilateral initiative,” a new strategic security combine in which it joins
as a key member of the security triad of Australia, Japan and the US—an
alliance that is being observed closely by Beijing.
In conclusion, the visit of the External Affairs Minister
ended on an optimistic note with the economic convergence grabbing much
spotlight although the long-standing boundary dispute still remains. What’s
more, India would always be
keen to keep a close tab on China’s march towards making a bid for regional primacy by virtue of its expanding economic and military clout in Asia and beyond.---INFA
(Copyright,
India News and Feature Alliance)
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Nuclear Dimension Of Terror:STATES PUT ON HIGH ALERT, by Insaf, 12 June 2008 |
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Round The States
New Delhi, 12 June 2008
Nuclear Dimension
Of Terror
STATES PUT ON HIGH
ALERT
By Insaf
India’s worst fears on terrorism seem to
be coming true. The chilling warning was sounded by Prime Minister Manmohan
Singh about nuclear technology “falling into the dangerous hands of terrorists”
at a conference on nuclear disarmament to mark 20 years of Rajiv Gandhi’s
action plan offered in the UN. In fact, an internal 68-page Government report -
Contemporary Appraisal of Internal Security Scenario, cautions of no letup in terrorists
threats till 2025. Besides, the 13 States already in the deadly tentacles of
various extremists groups, it warns against the ISI's plans to keep terrorism alive
in Kashmir and the Left-wing extremists increasing
belligerence. More. Militancy is all set to rear its ugly head again in Punjab,
the Naxalites would increasingly use the Bihar-Nepal border for smuggling arms,
ULFA’s reign of terror in Assam
would continue and insurgent networks would operate from Bangladesh and use madrasas in West Bengal for
terrorist activities.
To counter this major security challenge, the States would
need to monitor the influx of illegal migrants from Bangladesh, which has resulted in
big demographics changes, sheltered anti-India elements and provided a steady
recruitment to jihadi modules. Importantly,
the report states that the Bangladeshis would influence up to 20 Assembly seats
in Delhi and 25 Lok Sabha seats from West Bengal
and Assam where 50 per cent
of the population in Bengal’s 24 Parganas district and Assam’s Barpeta
are Bangladeshis. Six other Assamese districts are similarly affected. Worse,
terror cells in South India are liaisoning
with the underworld in Maharashtra and Gujarat.
The ISI’s two covert operations, Operation Topac and Operation Pin Code continue
to thrive and the Naxalites have made inroads in UP’s Terai region.
* * * *
Trouble Brews In Darjeeling
The Darjeeling
hills are headed for turmoil once again with the Gorkha Janamukti Morcha (GJM)
reviving its demand for a separate Gorkhaland and the West Bengal Government
arming itself with additional security force. On Monday last, the GJM enforced
an indefinite bandh, affecting normal life and forcing thousands of tourists to
cut short their holidays in the picturesque hills and adjoining Sikkim. While
the GJM blocked the National
Highway and resorted to violence, the Chief
Minister Buddhadeb Bhattacharjee stopped talks, tripartite or bipartite, until
the agitators gave up their demand for a separate State. Instead, Bhattacharjee
has offered more autonomy for the Darjeeling Gorkha Hill Council. The ball is
back in the GJM’s court which is sticking to its demand for a separate State.
Will it succeed again? After having ousted the DGHC Administrator and Gorkhaland
architect Subhas Ghising in February last?
* * * *
Fresh Governor
Trouble In Goa
After a lull of few months, fresh gubernatorial trouble is
brewing in Goa where the BJP has intensified
its campaign to demand the recall of State Governor S.C. Jamir. It has now
petitioned the President Pratibha Patil by claiming support of over two lakh
Goans. Recall, the Governor-BJP fracas started in January last after the
Governor had prorogued the Assembly session after the Congress-led State
Government, had been reduced to a minority due to the resignation of three
Ministers and withdrawal of support by another three MLAs. It remains to be seen how long the Chief
Minister Digamber Kamat can fob off attempts to dethrone him. Already he has
survived two coup attempts.
* * * *
J&K To Get Own
Minority Commission
Jammu & Kashmir is all set to join other States and get
its own Minority Commission. Once the Chief Minister gives his assent to the
Union Ministry on Minority Affairs asking the strife-torn State to set up the
Commission as per the recommendations of the Sacchar Committee on minorities.
The new Commission would enable the minorities in the State to avail of the
same benefits as their counterparts elsewhere in the country. Interestingly,
the minorities in the only Muslim-majority
State in the country are
Sikhs, Kashmiri Pandits, Jains, Buddhists and Christians. The new Commission
intends to mitigate the minority’s political grievances and give a fill-up to
development. The Kashmiri Pandits aching to return home, have their fingers
crossed.
* * * *
Himachal Reaping
Power Whirlwind
With good governance being the buzzword for States going to
the polls later this year, Himachal is busy reaping the power whirlwind. Thanks
to big States rushing to their tiny counterpart to buy power and keep its
voters happy. Needless to say, this new ‘connect’ between power, electoral
politics and innovation is raking in huge revenues to feed the State’s various
infrastructure development schemes. Already the BJP-ruled
State has sold 2000 million units of
its 632 MW surplus power to rival BSP’s UP, ignoring the bids of Saffron
Rajasthan, BJP-SAD’s Punjab and arch foe Congress’ Haryana and Delhi. Given the ‘power dynamics’ of
elections, after much pleading Punjab and
Rajasthan will get free electricity. Significantly, Himachal has already earned
59 per cent of its annual outlay of Rs.2400 crores. Clearly, the politics of
power makes for strange bed fellows and earns big bucks!
* * * *
BJP States Better
With Jobs
Poor performance in various States could well be another
nail in the UPA’s coffin, if one goes by its latest report card on its own
flagship programme -- the National Rural Employment Guarantee Scheme (NREG).
The BJP-ruled States’ have performed better than most Congress and Left-ruled States. In an exercise undertaken by the
Centre to verify implementation of the NREG scheme by State Governments, the
BJP’s Rajasthan topped the performance list with 124.71 points. Shockingly, the
Congress-ruled Maharashtra, the first State to
implement the scheme, was at the bottom. Barring Tripura, which ranked second,
Left-ruled West Bengal and Kerala ranked 22 and 11 respectively, behind the
Saffron Party’s Himachal Pradesh (ranked third) and Madhya Pradesh (ranked 9th).
With general elections next year, the Congress-led UPA has reason to worry. Or
better, it still has time to improve its performance.
* * * *
Delhi India’s Crime
Capital
Delhi has earned the ignominy of being
the country’s crime capital for the fifth consecutive year. Shockingly, the
Capital recorded the maximum number of murders in the world and occupies the
top slot for almost all other violent crimes, rape, dowry death, and
kidnapping, according to the latest report of the Union Home Ministry’s
National Crime Records Bureau. Over 53,244 criminal cases, including 467
murders, 581 rapes and 1764 dacoities were registered in 2007. Experts cite
lack of resources, police-criminal nexus and slow judicial process as some of
the causes for this. Besides, with Delhi
becoming a 'mayanagri' of artificial
development, there is a huge gap between the rich and the poor. Naturally, when
one-third of the population lives in slums in inhuman conditions devoid of any
basic amenities crime flourishes. If this is the state of affairs in Delhi, lest said the
better of the rest of the country!---INFA
(Copyright,
India News and Feature Alliance)
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Petroleum Prices:NO MORE ELECTORAL POLITICS, by Dr Vinod Mehta,17 June 2008 |
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Economic Highlights
New Delhi 17 June 2008
Petroleum Prices
NO MORE ELECTORAL POLITICS
By Dr Vinod Mehta
(Former Director, Research, ICSSR)
The hike in the prices of crude is hurting almost all
economies of the world, which are heavily dependent on the import of oil and India is one of
them. It imports 70 per cent of its requirements. But the domestic selling
price of petroleum products has never become a political issue in countries
other than in India
and a few others. The reason being that we have created such an irrational and
complicated structure of prices of petroleum products that even god would not
understand.
Most countries that are heavily dependent on oil import are
known to raise the prices of petroleum products without any fuss as soon as the
prices of crude go up in the international market. Consumers may not like it
but they too realize that there is no way out other than increasing the
domestic selling price. Therefore, they
either take it in their stride or respond by switching over to smaller cars or
use public transport.
There is no economic sense to either produce or procure a
product, say, for Rs 100 and sell it for Rs 80.
Someone has to account for the loss of Rs 20. This kind of policy was
one of the many reasons, which undid socialism.
The erstwhile socialist countries took pride in holding the price line
for decades but never explained how they were able to do it when the production
costs had gone up. It boiled down to
subsidies and deficit financing, but in the end their national finances went
haywire leading to the demise of socialism.
The Chinese Communist Party saw this folly a long time ago
and is seen rapidly building up a market-based economy. After Deng Zhao Ping went further with economic reforms, a telling comment came from
a Shanghai-based small trader-- that he would like to join the Party after he
had earned enough profits from his business and eventually became a capitalist! Cuba after Castro is too slowly
giving up such policies. The only
country left in the world to follow the pricing policies of erstwhile socialist
era is North Korea.
India has also been following the
“socialist” pricing policy in respect of at least two commodities, namely
petroleum products and fertilizers for the past many years. In the case of petroleum products it is cross
subsidy--levy higher taxes on petrol in order to keep the prices of kerosene,
cooking gas and diesel low. As a result
the domestic price of petrol is unrealistically high and that of other
petroleum products unrealistically low. Since the prices are fixed by the
Government in a market economy like India, the oil companies
suffer. In the case of fertilizers the
domestic selling price for various kinds of fertilizers is between 30 and 50
per cent of the production cost/import cost, with the government having to take
on the burden.
All political parties have accepted this kind of pricing
policy for petroleum products and fertilizers only to the extent that they
would simply oppose any realistic hike on the grounds that it will hurt the
common man, when in opposition, knowing fully well that it could jeopardize the
nation’s finances. If the common man can
absorb the hike in the price of milk and vegetables, when he can buy designer
wear or visit swanky coffee shops and buy a cup of coffee for Rs 60, why can’t
he absorb the hike in the price of petrol if the international price of petrol
goes up? Similarly, why can’t the families afford to pay the realistic price of
cooking gas? Any increase in the price
of cooking gas finds the media rushing to interview some middle class ladies on
the affect on their family budgets. Invariably each one of them is smiling and
condemning the price hike. This scenario
has become a stale ritual. Media never
asks these ladies, why they are peeved at the hike in price of cooking gas when
they don’t think twice of buying an expensive dress from a boutique or when
they go shopping for branded shirts and trousers for their husbands or branded
shoes for their? If all such kind of
expenditures does not upset their family budgets, why would some hike in the
price of cooking gas or say petrol hurt this budgets?
The pricing of petroleum products regrettably has gone out
of the realm of economic logic or common sense in our electoral politics. It has become a mighty stick to beat the
Government in power with. Thus, when
electoral politics and not the market decides the pricing of certain commercial
products, it is a sure recipe, for disaster of national finances. No political party or a coalition will ever
gain an upper hand in this kind of pricing policy, only the economy will suffer
and so will be the common man, who will be asked to pay more taxes.
It is high time that we get out of this highly convoluted
pricing policy of petroleum products once for all. Take it out from the realm of electoral
politics and back in to the realm of economics so that people know what exactly
they have to pay for petroleum products as they pay for a number of other
products in a market economy.
By holding on to this kind of convoluted pricing policy we
are sending wrong signals to consumers, who can afford to use and perhaps waste
these precious resources as the Government is willing to share half or the
costs with them. But the consumers
should know that the Government will take back its share by either imposing
more taxes, or adding service tax or some other commodity tax.
We are also sending wrong signals to the oil cartel that
they can raise the price of crude to any extent as the Indian Government will
always be willing to absorb the price hike by subsidizing it to its
consumer.
No modern government can escape providing subsidy to its
people depending upon the particular needs of its people. City public transport system in most of the
developed countries runs on subsidy.
While any country which is rich can pay subsidy on any number of
products, India
cannot afford to do so and therefore, it has to be choosy. Our education
system, health care services and drinking water needs require more subsidies
than perhaps anything else; commercial products certainly not.
Petroleum products are certainly commercial products and
should be charged commercial rates. Let
prices rise if the international prices go up and let prices go down if the
global prices go down. It’s time the
Government grows out of its role of fixing prices of petroleum products and
assume the role of a watchdog so that oil companies do not take the consumer
for a ride. –INFA
(Copyright,
India News and Feature Alliance)
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