Petrogoods Price Increase Likely After March 31

A consensus appears to be emerging among the United Front (UF) constituents on the need to increase the prices of petroleum products to check the rising oil pool account deficit.

The Left constituents, however, have ruled out two price increases in one financial year and bypassing of Parliament in taking such a decision. This indicates that the increase in the prices of petroleum products can come about only after March 31. The government had increased petrogoods prices just before the budget session of Parliament last year.

A final decision on the issue is expected on February 9, when the UF core group meets here. It will also give assent to the increased price for sugar at Rs 10.5 per kg for distribution through the PDS.

Former finance minister and Congress Working Committee (CWC) member Manmohan Singh has already requested the government to increase the price of petroleum products to bridge the huge deficit. UF leaders maintain that the deficit is likely to be around Rs 14,000 crore by the end of the current financial year.

The Left parties, who were strongly opposed to these hikes until recently, have, of late, been showing some understanding that the threat to the government that they perceived from Congress president Sitaram Kesari has receded. Recent statements by Tamil Maanila Congress leader G K Moopanar have gone a long way to reassure them that the Gowda government will last for at least the rest of this year. They were chary of being associated with unpopular price hikes at a time when general elections could have come around sooner than later. Now that they see the government lasting, the knowledge that the decision cannot be put off indefinitely weighs more heavily with them.

The UF has to consider whether there is any possibility of postponing petroleum price hike by comparing the inflationary impact on the economy both in case the prices are hiked and in case they arent. The economic advantages of a price-increase would then be compared with the political disadvantages attached to the move.

The Left parties and some other Front leaders have told their colleagues that the petrogoods price-hike must be effected through Parliament and preferably in consultation with the Congress. Last year, the Front government had drawn flak not only from the Opposition Bharatiya Janata Party (BJP), but also from the Left for bypassing Parliament to announce a price-hike just on the eve of the Budget session. The Left parties had argued with finance minister P Chidambaram that the government must check rising prices of essential commodities before it even planned to increase prices of sugar and petroleum. Mondays meeting of the Cabinet Committee on Prices discussed ways to bring down prices of foodgrains so that sugar price increase and, if possible, petroleum price rise do not hit the consumers hard.