Prime Minister Manmohan Singh wants deregulation of diesel, but the Congress party and the political leadership of the United Progressive Alliance (UPA) have no appetite for the move, a top minister told Business Standard.
The minister, who did not want to be identified, said the opposition of the Trinamool Congress (TMC) to the move was well known. “But it isn’t just the allies. Even Congress ministers who privately agree with the economic necessity of deregulating diesel, publicly oppose it.”
This is the first time a minister has conceded there is a divide between the party and government on the sensitive economic issue.
UPA had said a few weeks ago that “tough decisions” would be taken to revive the economy and diesel decontrol was said to be in the offing. However, politics is delaying an economic move that economists say cannot be postponed any more.
International credit rating agency Standard and Poor’s had downgraded outlook on India’s credit rating in April. Later in June, it had warned India could be the first BRICS (Brazil, Russia, India, China and South Africa) nation to falter on credit ratings. A paper has already been sent to the Prime Minister’s Office warning of the consequences of another outlook downgrade from ‘stable’ to ‘negative’ unless India demonstrated some real will to control its deficit. There is 83 per cent probability, the paper said, that a ‘stable’ outlook downgrade would be followed by a ‘negative’ outlook rating.
However, the government is bound hand and foot, the minister said. “As diesel deregulation directly affects farmers and the agriculture sector, political parties like Samajwadi Party and NCP (Nationalist Congress Party), both backed by strong farmer votebanks, don’t want it.”
UPA leadership has neither managed to convince coalition allies nor its own party members of the urgency to decontrol diesel. “It’s a case of political impotence; a total case of hopelessness,” added the minister.
Dismissing the suggestion that the powerful auto lobby is opposed to the move—five per cent of diesel consumption is due to private passenger vehicles—the minister says political opposition is the crucial factor.
The under-recoveries in diesel at present amount to around Rs 11 per litre. A minimum increase of Rs 5 per litre is needed to make a dent in India’s deficit.
But how much parties are opposed to the move is clear from the outcry over a nominal 70 paise price hike in petrol, which is partally decontrolled. UPA allies like TMC made a bigger hue and cry over the increase than the opposition Bharatiya Janata Party (BJP).
When asked if Agriculture Minister Sharad Pawar had been joking when he said instead of moving towards diesel decontrol, the UPA might have to consider deeper diesel subsidies, the minister said: “take that joke seriously”.
