If Wednesday’s unprecedented hike in petrol prices was to cut down subsidies, it is an eyewash as the government doesn’t subsidise oil companies for their Rs 7.78 loss per litre of petrol.
The government only subsidises their losses on diesel, kerosene and LPG. Petrol is now deregulated, and it is for oil companies to decide to hike prices or not, though the government, as majority shareholder, does interfere. Petrol, therefore, is just a minor sub-plot in the much bigger Rs 1.38 lakh crore subsidy — the major villain responsible for India’s fiscal deficit and current account deficit problems. The 15 million metric tonnes of petrol consumed in India is, besides two-wheelers, used by petrol-driven cars ranging from mass-market Maruti 800s/Altos to the super-luxury BMWs and Audis, and was subsidised by the oil companies. A far bigger issue is the government underwriting cheaper diesel, kerosene and LPG, which account for the fuel subsidy of Rs 1.38 lakh crore. Of 65 million metric tonnes of diesel consumed, 60-65 per cent is by cars, including luxury vehicles. One fails to understand why the government should subsidise these car owners at Rs 15.35 per litre. Diesel is also used by malls to run generators, mobile operators for towers, and factories which use it instead of furnace oil as it’s cheaper. Why should any of them be subsidised? One could understand the government trying to provide cheaper diesel to the railways, public transport and other entities that do serve a larger public need.
The government appears, correctly, to have decided against any “dual pricing”: this would only open a huge new avenue of corruption. It is said to be considering hiking diesel and LPG prices, on which the subsidies are Rs 15.35/litre and Rs 479/cylinder respectively. There will be a huge uproar when this happens; and as we have said earlier in these columns, it should first visibly show that its ministers and officials can make sacrifices before it asks the aam aadmi to do so. An immediate halt to the supply of subsidised diesel for government vehicles and offices, a visible cut in the sizes of VIP convoys and similar steps will show people that their rulers too can share the pain. This needs to be applied down to the state, district and panchayat level so that the message goes home. The same yardstick could also be applied to LPG.
And if there is no alternative but to raise prices, this must be in a phased manner, baby steps at a time. If the government refuses to allow increases for months at a time on the pretext of elections, and then suddenly permits a huge increase as it did in the case of petrol, it has clearly given up any attempt to play fair by the people. Is this good governance?