Oil Hike: The Rollback Drama

After many days of speculations and much political machinations, the government finally announced the hike in fuel prices of petrol and diesel. The response to the hike was well on the lines that the political parties had earlier stated. The Left has been the most vocal political outfit that has virtually condemned the government for its decision. Also the principal opposition party BJP and NDA have asked the government to look at the excise duties and a possible cut in the duties and pass the benefit to the oil PSU’s and the user. While this maybe a possible solution for the citizen and the PSU’s the possible move will have repercussions on the Government coffers and a dip in revenues. The government already having announced mega projects like the National Rural Guarantee Scheme and the now proposed increase in the number of seats and infrastructure to buffer the 27% OBC reservation in higher education will need all its reserves to make these schemes economically feasible.

The opposition has not only come from the usual suspects – the Left and the NDA, there have been some reservations expressed by the Congress itself. It is a clear indication that Sonia Gandhi has been trying to distance herself from her own government’s decision in order to maintain her messiah of the aam admi credentials. It was indeed ironical that just as Petroleum Minister, Murli Deora was admitting that he had no choice but to increase oil prices, Congress spokesperson Abhishek Manu Singhvi was expressing his party’s displeasure over the hike. The Congress’ ploy to differentiate itself from the ‘government’s’ decision will not work, since the obvious question to be asked is that – if all the principal constituents of the UPA have opposed the oil hike and if the Congress itself is against it, then who took the call? Was it the prime minister and the finance minister – both Congress party members? Or was the decision based on a broad consensus by the UPA?

Another pertinent observation has come out with the oil prices rising and the sensex dipping. India is now part of a global community and with the world increasingly becoming flat, events taking place in the global scenario have a bearing on India and its citizens. The increased inflow of FDI’s and foreign capital have made India the preferred destination for investment and India has registered an astounding 8% growth rate. But one must remember that with the good comes the bad. Once there was a global meltdown in the global bourses, there was a similar effect on the Indian market as well. Similarly, the current middle east crisis in Iraq and Iran coupled with surging global demand for fossil fuels have sky-rocketed oil prices. This is a price to pay for being part of the global economy. We cannot take the best from the phenomenon of globalization like outsourcing of jobs etc. and expect not to be hit when oil hikes, wars and decisions of global implications are taken. The quicker we handle this reality the better equipped we will be to counter any such moves. India must take its role in the international scenario more seriously and ensure that we are in the scheme of things to ensure that citizens don’t bare the brunt of decisions that are not necessarily taken from the PMO. China has used its oil diplomacy and proximity to Iran on the nuclear issue to ensure uninterrupted supply of oil to its citizens. India as part of its need to meet energy demands have instead invested in the gas supply line from Iran, which is now mired in controversy and has also relied on the futuristic and highly ambitious Indo-US nuke deal. The deal as it turns out has become less about Indian’s energy needs, as was sold to the Indian population by the Indian government, and more about nuclear non-proliferation.

The standard demand for a roll back will not only hurt the already bleeding PSU’s but will further increase the disparity with global oil realities and its pricing in India. Whether it is a one-rupee rollback or more is immaterial, what is important is for every citizen to realize that these hikes will become the norm as demand surges and oil supplies have remained the same. Artificial subsidies will not work; prudent economic policies and clearly voicing India’s concerns in the global forums will prove better in the long run.