Fuelling reform PDF Print E-mail
Tuesday, 24 May 2011 00:00
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Prices of petrol and diesel ... will be market determined. The overall impact on the poor and the vulnerable is being minimised.” “Despite spiralling international oil prices, the retail selling prices of diesel, PDS kerosene and domestic LPG have not been increased after June 26, 2010 ... to protect the common man”. Which one of the two statements, both from the same chapter of the UPA’s Report to the People 2010-11, do you take seriously? One suggests the UPA is ready to get back on the reforms track, the other that it will be business-as-usual (BAU) when the GoM meets this week on the fuel price hikes—though petrol prices were decontrolled a year ago, oil PSUs never raised prices, and when prices were hiked after the assembly elections, these PSUs were incurring a loss of R10 per litre. Fuel subsidies, which were R78,159 crore in 2010-11, are projected to more than double this year on a BAU basis—in the last seven years of the UPA, fuel under-recoveries have been around R4,23,000 crore, and more than half of this has been borne by the oil PSUs, resulting in a sharp fall in their share prices.


That it is possible to hike prices while keeping consumer interest in mind was brought out by the Kirit Parikh report, which pointed out, in February last year, that the hike in per capita incomes since 2002 meant retail prices of kerosene and LPG could be raised by R6 per litre and R200 per cylinder, respectively, without affecting real incomes. Even this, however, was not done and prices were raised by R3 and R35, respectively, in June last year.

While the UPA’s report card also talks of the need to keep other subsidies in check, it says the Right to Food Bill will be introduced soon—that, going by the PMEAC’s estimate, will cost around R92,000 crore, as compared to the current food subsidy budget of R60,573 crore. The real issue, of course, goes beyond containing the fiscal deficit since every budget has some cushion—disinvestment receipts of over R15,000 crore last year were not taken into account in the budget estimates and another R15,000 crore can come from the charges for the ‘extra’ spectrum. Whether it is a land acquisition Bill, the GST Bill, the PFRDA Bill, the Companies Bill, operationalising the Chawla Committee on how to price natural resources, ensuring there are no delays as in the Cairn-Vedanta deal … the government has a long list of what it needs to do.


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