Deregulation in limbo

Bihar polls may have spooked oil price reforms

The deregulation of petroleum product prices by the Narendra Modi government, even as global oil prices have gone down, has been a boon to Indian oil and gas companies, engaged in both refining crude oil and marketing petroleum products. Since the changeover, the consumer has been happy with declining prices, along with occasional rises, in keeping with the global trend. In fact, as all three relevant elements - composition of the Indian crude oil basket, the global prices of its elements and the rupee-dollar exchange rate - are available in the public domain, it has been possible to predict how factory gate prices will change as every fortnightly revision date approaches. By this ready reckoner, as reported in this newspaper, prices of diesel and petrol for the Indian consumer should have gone up marginally in the middle of this month. But surprisingly, this did not happen and they remain where they were after the previous change. This has been freely interpreted as the Union government's attempt to create a favourable climate for the BJP and its allies in the impending Bihar assembly elections. A price rise would have presumably given a handle to the grand alliance led by Chief Minister Nitish Kumar to criticise the ruling dispensation at the Centre for its inability to hold prices.

On being asked, a top executive of an oil company has defended the action or non-action on the price front by arguing that decontrol means being able to change prices at a time of one's own choosing. While this can pass muster in a college debate, it is important to recognise the underlying political reality. Political dispensations in India change with the promise of change and some overt change does come about but at the end of the day, in substance, nothing seems to have changed. It seems despite the promise and deliverance of oil price deregulation, the reality is that when it comes to the crunch, the present government will not hesitate to dictate a commercial action or non-action on political grounds if it feels the stakes to be high. This is bound to create a dent in the solid support that Mr Modi commanded in the last general elections among supporters of reform. Leaders of India Inc. were prominent among them. There has indeed been a sense of disillusionment in business circles as the Modi government approaches its one-and-a- half-year mark that it is going rather slow in delivering along promised lines.

It is important to reiterate that consumption of fossil fuels should not be subsidised as much as renewable energy should be. Simultaneously, there is a need to raise the energy consumption level of the poorest (currently appallingly low) as that importantly impacts their level of well-being. In particular, urgent action needs to be taken so that poor women, mostly in rural areas, do not continue to cook with whatever will burn and consequently be afflicted by severe respiratory ailments from the smoke they have to per force inhale. This calls for targeting of subsidies, not their blanket distribution. In particular, the manufacture and sale of newly developed efficient cooking stoves using virtually any kind of biomass which have proved their mettle need to be facilitated as that will create enormous gains in terms of both equity and public health.