Double standards

The Left parties have opposed the government's move to raise petrol and diesel prices, arguing that this will increase inflationary pressures and hit ordinary people where it hurts, in their wallets. This is despite the knowledge that the state-owned oil-marketing companies have been incurring a loss of Rs 1,500 crore every week. So the argument for raising prices stands""and the fact that each price hike is such a painfully drawn-out decision underlines the folly of introducing politics into pricing, and also the damage done by rolling back the price decontrol that was to have taken effect four years ago. That having been said, it must be conceded that the Left parties are right when they emphasise that there are alternatives to a price rise, considering that government levies make up about half of the retail price of petrol. Indeed, Petroleum Minister Murli Deora (like his predecessor) has spent many days arguing with the finance minister that central duties on petroleum products should be cut. Some cuts have indeed been announced in the last couple of years, but Mr Chidambaram seems to have indicated that he will cut no more.

The central levies, however, are just one half of the story, considering that state government levies on these products are also considerable, and range from 20 per cent for petrol in Delhi to 30 per cent in Maharashtra (where there is a one rupee state cess per litre as well), and from 12.5 per cent for diesel in Delhi to 34 per cent in Maharashtra. In the case of Maharashtra, for instance, the state sales tax and cess on petrol add up to 75-80 per cent of what the Centre pockets by way of excise and customs duties. So, perhaps it's time for the Left governments in both West Bengal and Kerala to lead by example, and cut their sales taxes. Reducing the sales tax on petrol from the current 26.4 per cent in Kerala to Delhi's level of 20 per cent would reduce the retail price by around Rs 2.30. That would substantially neutralise a price hike announced from New Delhi, and the Left would have put its money where its mouth is.

The predictable riposte would be that the people's governments in these two states would be incapacitated by the revenue loss, and therefore unable to carry out programmes for the benefit of the people at large. But as Mr Chidambaram has been at pains to point out (to no effect, so far), the huge taxes collected by his ministry are increasingly being spent on programmes dear to the Left, such as the rural employment guarantee and revival of unviable public sector companies. While the employment guarantee is expected to cost Rs 40,000 crore a year, the proposed social security scheme for the unorganised sector could cost even more. Surely, what is sauce for the goose must be sauce for the gander as well. But of course, that has not been the case on other issues that have been championed by the Left""which opposes privatisation in New Delhi even as it practises the very same policy in West Bengal, and which opposes any form of labour reform at the national level while banning strikes in the software-enabled services sector in West Bengal.