Saturday, May 26, 2012

Petrol Price Hike - Common man bearing the burden of others


Netizens are a different community –  once they post something on their FB walls or on Twitter, they think their democratic duty is over.  What they don’t realize, is their protest, however muted it is would  at the most reach a small circle of other net-users that too briefly – you are not going to impact anybody and certainly not the Government. Price controls and aided subsidy programmes are burden on Govt finances and are again factually borne by the common man, taking the onerous burden – the benefits don’t accrue to those for whom they are intended and the mispricing skews the economics of the market place.  The steep increase in petrol price but not followed by a price hike in diesel,  reinforces the belief that the cost of running SUVs and commercial vehicles is borne by aamadmi.  You regular see advertisements put in by Oil Companies either extolling their own performance or praising the Govt on their various schemes.  When these Companies are reportedly incurring huge losses – where from this money comes ? and what is necessity ??

The popular joke going around is : ‘Virender Sehwag had the resources of chasing the ‘double nelson’ of CSK – but just as he padded up, he heard the announcement that the winner takes ‘volkswagon car’ – ‘car as a gift and petrol on self’ was jittery enough to lose the game !!

There is hue and cry over the sharpest fuel price hike ever ! – predictable howls of protest – TV channels beaming that people are unhappy and protesting – but what would be the impact – will this every be sustained or more importantly, focused ?  - and would people be happy with a small partial roll back ??   Just as the news started spreading, people started queuing before the Petrol bunks, long lines, relentless honking of horns, outsmarting and overtaking others in the lane – all to fill the vehicles first – what madness !! 

Will there be a National debate or a Policy on who should receive the subsidy and what should be subsidized and for how long ? and for how long, price hikes would be in the garb of adjusting the effect of subsidies !!  - it is more of economic mismanagement than the International oil price movement !!! – it is the  failure to raise retail prices of diesel and kerosene, which are subsidised heavily, skews the  equation – to the point where, for instance, two-wheeler riders are cross-subsidising diesel SUV owners – and feeding marketplace malpractice, with kerosene being diverted from PDS outlets and used to adulterate petrol. It also perpetuates the “false economics” myth that subsidies shield the poor and that any reform of the subsidy regime. 

It is the poor who are the needy and there are other segments like agriculture who should be getting subsidy.  While people clamour for white collared jobs in the city, flying in cosy cars, owning affluent apartments – they also vie with the lower strata for availing all subsidies.  Kerosene is to be subsidized ostensibly to shield poor – thus should be allocated for PDS at lower prices but gets diverted and is  used to adulterate transport fuels. In effect, only crooks and black marketeers benefit from the government’s subsidy intended for the poor. As for diesel, the mispricing has skewed its usage disproportionately towards private vehicles, not public transport – the intention that underlies the subsidies.

Do you recall that about 4 decades ago, LPG gas cylinders were at less than 5% of the homes.  A gas stove was a status symbol.  People used only kerosene stoves and it was wood fired ovens in some.  Any increase in  price of LPG gas would throw out of balance the budget of many middleclass household.  To understand the simple logic better – the price of 14.2 kg LPG gas cylinder supplied for domestic use is   Rs.393.55 at Chennai.  But if it were to be delivered to you at the market price i.e., refinery price + transportation + administrative costs margins it would be not less than Rs.750/-   - so you are enjoying closer to 48% subsidy – that never makes us happy ! and you feel you are entitled to such benefits – but this Govt subsidy and burden sharing  is not for those who really should be receiving it – the same domestic gas finds its way through devious means to many commercial users – simply all the users are cross-subsidising them  - eventually the increased cost is borne by all the users.  If there were to be a mechanism, perhaps there would be multiple rating wherein only the intended recipient gets the subsidy, others pay the cost that they should be paying !!!!

Perhaps it is the time to boldly say that ‘lower price is not entitlement’ – we do not want subsidies – only want to pay a fair price, that pricing being progressively done in market dynamics without benefitting the elites in any manner.  The Country can never be run by popular sentiments and somewhere there has to be a balance.    The country has to be administered by strong measured action and there is no point in just providing explanations to troubles ! 

There are different parties in the World biggest and longest democracy – but the Parliamentarians are busy discussing irrelevant issues.  The good news that the High powered Ministerial panel on revision of diesel, domestic cooking gas and kerosene, headed by Finance Minister Pranab Mukherjee, is unlikely to meet this month because the UPA would not want to provide fodder for its allies to attack it.   So a rise in diesel / kerosene / domestic gas is unlikely to follow soon…………  but that is only temporary – that is more of when rather than will it ?

With regards – S. Sampathkumar.

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