Prices, petrol and people

BY darius| IN Opinion | 12/06/2006

You don`t say!

Darius Nakhoonwala 

In 1927, the price of a loaf of bread in the USSR was 10 kopecs. It was revised upwards after 72 years in 1989, by two kopecs. That was Soviet economics. If the Left and the BJP had their way, the price of petrol and diesel in India would also never rise, regardless of the price at which crude oil is imported.  

Soviet economics ensured the collapse of the USSR. Left and Right economics in India would ensure the collapse of India`s oil companies who, before the price increase last week, were losing money handsomely.  

As the Business Standard put it, " the entire net worth of the state-owned oil-marketing companies (IOC, HPCL, BPCL and IBP) would have been wiped out about 1.8 times over, given that their net worth is Rs 41,500 crore and the under-recoveries for the year (prior to the price hike) were Rs 73,500 crore."

That one point, really, was the reason for the price increase. There is no point in killing geese that lay golden eggs.  

But the Hindu, growing sillier by the day, seems to think it is all right to do so. Thus it spewed out pearls of populist wisdom, never mind if the much hated BJP is also saying the same thing. ".. the government has shown utter insensitivity…The present hike… could prove crippling… cascading effect on inflation, push up the cost of living and eat into the purchasing power of the poorer sections…voters… have been taken for a ride... the Congress and others will have to pay a heavy political price for two-timing…"  

Then came the real reason for the gripe: "the UPA chose to override the objections of the Left…" But would anything necessary get done if the government heeded all the objections that the Left raises?  

But the real irony? States run by the Left and the BJP have both refused to reduce the sales taxes that they levy, while several Congress-run states have done so. The Hindu remained silent on this.  

Sensibly, the Deccan Herald pointed out that "the hike is only a fraction of the actual hike in cost of petrol and diesel. The prices of PDS kerosene and domestic cooking gas, which have been kept out of the latest round of revision for obvious political reasons, need to be raised by Rs 17.16 per litre and by Rs 114.45 per cylinder respectively." 

Amazingly, all other leader writers, while acknowledging the inevitability of the increase, mindlessly echoed the conventional Left wisdom that taxes on petroleum should be reduced. The Hindu wrote "reduction in the relevant taxes should have been the first option."  

The Telegraph wrote "About 50 per cent of the retail price for petrol is made up of government levies. If this were reduced, the price of petrol would automatically come down…The common man, the left`s hapless hero, is thus a victim of the State`s taxation policy, even in states where the Left is in power."  

The Hindustan Times struck just the right note. " One cannot fault any government on the question of subsidies for the poor. Indeed, any government which does not strive for a greater measure of social equity is fundamentally flawed. But it is equally flawed to mask electoral populism under the garb of equity. Mixed policies will always deliver mixed results."  

The demand to cut customs and excise duties may sound fine but only The Telegraph asked the million dollar question: where will the money come from to fund all those welfare programmes - Rs 40,000 crore on the rural employment guarantee scheme alone?  

The Pioneer, which has been going on and on about inflation, did not write an edit. I wonder why.

 Darius.Nakhoonwala@gmail.com