Govt Ready To Risk Political Fallout Of Oil Price Hike

The government seems determined to raise the prices of petroleum products, regardless of the outcome of the May 25 meeting of the United Front steering committee.

Economic compulsions may force the government to unilaterally announce a price hike, ignoring the political fall-out of such a move.

The government seems to be of the view that it has to act soon to curb the Rs 16,000 crore oil pool account deficit, which is increasing by Rs 800 crore every month. Oil companies have already exhausted their enhanced external commercial borrowing (ECB) limit of $3.5 billion, threatening to bring oil imports to a standstill.

 

The government is aware that in the present uncertain political atmosphere, no party will openly favour an unpopular decision like a hike in petroleum product prices. Even minister of state for petroleum T R Baalu publicly opposed a price hike in Thanjavur on Sunday. The Left, especially the Communist Party of India (Marxist), has also been openly campaigning against the proposed price hike. The Left has asked the government to explore alternative methods of generating revenue to reduce the oil pool deficit.

The Communist Party of India (CPI), which is a member of the government, has not made any statement supporting the proposed price hike. On the contrary, it has been making feeble noises about the desirability of avoiding a hike as long as possible.

The governments earlier attempts to place the issue before the Front steering committee had come a cropper. At the last meeting of the steering committee on May 10, the issue was not even raised. Instead, it was deferred till the next meeting, scheduled for May 25.

However, Sonia Gandhis entry into the Congress and the subsequent surge in optimism of Congressmen has altered political equations. Political analysts say this new development could prompt the Congress to pull down the Gujral government and force another general election. A politically unpopular decision like a petroleum price hike would almost certainly be exploited by the Congress as well as the UFs other rivals during an election campaign.

The government is aware that by-passing the steering committees recommendations could lead to a volley of protests from the Front constituents.

The government may be forced to partially roll back some of the increase, as had happened in July 1996, when the price of petroleum products was last raised.

But officials say even a partial increase will ease the rising oil pool deficit to some extent.