Playing politics again

Politics and economics usually pull in opposite directions. Left to themselves, governments in democracies, because they depend on voters' goodwill, would (and often do) make a complete mockery of the latter.

But democracies also usually manage to foster strong institutions to keep governments and politicians in check. After a period of about 20 years beginning in 1972, when the Election Commission, which is a Constitutional authority, became an administrative adjunct of the government began to come into its own in 1991.

The redoubtable T N Seshan decided to discipline erring governments and politicians. Since then the Commission has done a marvellous job of ensuring that things are kept on an even keel and elections are as free and fair as possible.

The latest example of the Commission drawing attention to yet another piece of governmental skulduggery came on Monday. It asked the petroleum ministry why, in the face of rising international prices and after having formally relinquished control over the prices of petroleum products as far back as April 2002, it was refusing to increase the domestic price of petrol, diesel, kerosene and liquefied petroleum gas (LPG).

Are you by any chance, it asked, trying to keep voters happy and influence them? In that case, would you like to tell us why we should not take action against you? Petrol and diesel prices were last revised in December 2003 and kerosene and LPG prices in March 2002.

The ministry is believed to have denied that it has anything to do with determining prices and that this is done by the oil companies, which have been making such huge profits that they can easily absorb the increase in international oil prices.

Technically, perhaps, the ministry is right. But given the ownership structure of the main oil companies one would have to be very naive indeed to take its explanation at face value.

The truth is that even now it is the ministry's view that prevails when it comes to fixing the prices of politically sensitive items like petrol, diesel, kerosene and LPG. With two sets of major elections between November 2003 and April-May 2004, it is obvious what's been happening.

Certainly, the chairman of the two largest oil companies, Indian Oil Corporation (IOC) and Oil and Natural Gas Corporation (ONGC) have protested that it is proving prohibitively expensive to subsidise their sister oil-marketing companies.

The latter has also pointed out that it would be in violation of the promises made to investors in ONGC's recent public issue. Thanks to a government order that obliges the ONGC to provide a discount to oil marketing companies on domestic LPG and kerosene, its profits have declined by about 3 per cent.

At the same time, this discount has bolstered the oil companies' profits. On the whole, it is a piece of cleverness that no one is fooled by.

Can the EC, and should it, throw the book at the government? It would be perfectly justified if it concluded that the only reason the government is still interfering in oil prices is that higher prices upset voters.

In fact, the EC should go a step further and ask the same question of the Indian Railways, whose finances are in an ICU because no government for the last eight years has dared to address the severe skews in fares.