Feb 05 : The Kirit Parikh Committee’s recommendation to deregulate fuel prices, and in particular raise cooking gas and kerosene prices in tandem with the rise in GDP, is more or less on expected lines. But this is not just about the immediate rise of Rs 3/litre for
petrol and diesel, Rs 6/litre for kerosene or Rs 100/kg for LPG, but a policy change — one that the government will need considerable political will to implement in the long run. If diesel costs more, for instance, what will happen to food prices? How is India’s rising GDP any consolation to a farmer with three acres who must pay more for diesel to run his pump? He doesn’t get market prices for his crop, and if his diesel bill rises too he could well decide to cultivate less — which would add to food supply problems. It must be remembered that many people in this country are still reeling under high food prices, and while globalisation and economic liberalisation have enabled a better lifestyle for a section of the population, it has also impoverished a much larger number, specially in rural areas, despite the landmark effect of the national rural employment guarantee scheme.
The government, while reviewing the recommendations, must also consider its impact on the Bharat beyond India’s metropolises and major cities. But having said that, it is undeniable that if the government wants to accept even a part of the committee’s suggestions, no time is better than the present. The political environment is stable: there are no major elections coming up, nor are there any strong pressure groups within the government as there were earlier. One solution could be to implement part of the recommendations: such as starting with decontrol of petrol. There is no good reason why the government and the oil marketing companies should subsidise the price of petrol even a day longer. There is an irrational fear that unless diesel prices are raised proportionately with that of petrol, it will lead to large-scale adulteration. The government can easily control such adulteration if it has the will to do so. This lack of seriousnesss is evident in many other areas too, where corruption and cronyism sap the very moral fibre of the idea of governance.
If petrol were to be decontrolled, however, raisng transport costs for all those travelling in cars or two-wheelers, there is something else the government would need to do urgently. If private transport becomes prohibitive for some people, it will be necessary to provide a safe, affordable and comprehensive public transport system to all those living in big cities and small towns across the land — so much so that people will find it a better option than using their own cars. It will be worthwhile to examine if state governments and municipalities can be compelled by law to provide effective public transportation within their jurisdictions. With the possible exception of Mumbai, this is by and large non-existent across urban India. Only when such systems have been put in place will the government be justified in imposing higher taxes on private vehicles than on public transport ones. And once the subsidy on petrol is removed, the government could turn to diesel — starting with selling it at market prices to those with bigger vehicles who need to be subsidised the least.
It is undeniable that the oil marketing companies as well as upstream companies like ONGC and Oil India (which together bear two-thirds of the subsidy burden, the remainder being borne by the government) will gain immensely if the committee’s recommendations are implemented. Their future development could be stymied if the subsidy regime continues unchanged as investments and future expansion will be at stake.