Catching the diesel tide PDF Print E-mail
Thursday, 06 September 2012 00:00
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In July a Rs 9 hike was good enough, today is is Rs 17 a litre

With the current session of Parliament coming to an end on Friday, the buzz is, once again, that we can expect a hike in diesel prices, perhaps even in LPG including a possible cap on the number of cylinders that can be bought at a subsidised rate each year. Why after Parliament? Because, the government doesn’t want the Opposition to create a row? Given that it was Mamata Banerjee who has successfully ensured there has been no diesel hike so far, a diesel hike after Friday isn’t quite a given, and certainly not in the size that is required. Indeed, the last time there was a similar buzz was just a month ago, in August. Let the Vice-Presidential election be over, we were told, and the government will get back to the path of reform—a slightly inopportune diesel price hike, the argument presumably was, and the election could go against the government. Well, it’s been nearly a month since that event took place and there’s been no diesel price hike (as on today, the diesel subsidy is well over R1.2 lakh crore). Prior to that, in July, it was the Presidential election after which reforms like a hike in diesel prices were supposed to take place; and before that, way back in February, it was the end of the Uttar Pradesh elections that was widely touted by government officials as the date after which the government would get into its own.

That these milestones came and went by is the least of the problems since we’ve lost more than just time. In the interim, the climb has become that much steeper. In July, around the time the Presidential election was being fought, the under-recovery on diesel was around R9 per litre. Today, that’s around R17. So, a R4.5 per litre hike just two months ago would have been hailed as a major reform since it would have cut the subsidy by half—today, the same hike will cut the subsidy by just a little over a fourth! In the case of LPG, the per cylinder subsidy was R319 in July and is up to R347 today. Even in August, when the Vice-Presidential elections were being held, the under-recovery on kerosene was R12 (a table on page 1 of today’s paper has all the details). Of course, the ultimate in bad timing is that, in 2009-10, the total under-recovery on all fuels was just R9,279 crore. Imagine freeing up prices then, more so since the economy also looked a lot better than it does today—in the three year interim, the overall fuel subsidy (based on today’s level of prices and the value of the rupee) is a whopping R2 lakh crore. Talk about missing the bus again and again, and again.

Last Updated ( Sunday, 16 September 2012 14:08 )

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