Should the opposition criticise the oil price rise?

DEBATE

Though the hike will burden consumers, calling it an 'act of economic terrorism' may be irresponsible

Rajiv Pratap Rudy
BJP Spokesperson

NDA had implemented policies that required any subsidy or social-sector scheme for growth to necessarily be presented in the budget.

When we allege that the government has mismanaged the economy, it primarily comes from the fact that it planned and propagated populist schemes without tying it up in the Budget. They have dealt with the economy like they deal with the stock market. Using the backdrop of 9 per cent growth, they have attempted too many misadventures for which anticipated resources could not be provided, mainly due to the steep hike in crude oil prices across the world. First, the finance minister announced populist measures. Then, apart from the anticipated growth figures, no other specifics about funding the promises made in the budget were mentioned in Parliament. When crude oil prices, which were rising anyway, reached an all-time high, the government was left scrambling for options.

The Rs 4-lakh crore subsidy on oil, fertilisers, and non-budgeted populist measures has completely backfired. The BJP, during the time of the National Democratic Alliance (NDA) government, had made inroads into fiscal reforms directly affecting this. On April 1, 2002, the NDA government had implemented policies that required any subsidy or social-sector scheme for inclusive growth to necessarily be presented in the budget, and the expenditure to be accounted for from consolidated funds. This also included all subsidies given to the oil sector. Clearly, the current government has failed to do the same. Oil companies must be free to regulate prices; any unanticipated rise in prices should be cross-subsidised in the budget and also moderated by the government through cuts in excise duty.

The present finance minister, who has held the same post during the United Front government in the past, has played a part in initiating these measures. He has now abrogated all reformist steps he had enumerated earlier.

He says, "Main hoon na," but the BJP wonders where the finance minister is amidst all this chaos. People have not been clearly informed about the state of the country's finances in terms of global oil prices.

The statement of the prime minister, asking austere measures be adopted, only affirms the BJP's stand asking him to admit his failure in pushing reforms. This also confirms the BJP's view that the prime minister is influenced by 10 Janpath and the Left parties, affecting his ability to govern and deliver.

Manish Tewari
Spokesperson-Congress

There was a choice between bankrupting the Navratna companies and political expediency, the UPA government chose the latter.

The BJP described the Union government's decision to raise oil prices as an 'act of economic terrorism'. The media has  been unequivocal in condemning the use of irresponsible and immature phraseology by a party that led an alliance that ruled over India for six years. Rather than displaying vitriolic verbal gymnastics, it would have served the BJP well to re-examine the NDA government's track record. In April 1998, when the NDA alliance (in its earlier incarnation) formed the government for the first time, the price of a barrel of crude oil was $12.50. It rose to $22.75 in November 1999, when NDA came to power once again. When they were voted out of power in May 2004, the prevailing crude oil price was $36.25. (All prices are an average of the Indian basket, primarily Dubai and Brent Crude.) The total increase between April 1998 and May 2004 was $23.75.

Contrast this with four years of UPA rule. From an average price of $36.25 in May 2004, a barrel of crude oil rose to $133.84 on May 21, 2008. An increase of $97.59 on an average. On June 6, 2008, the price touched $139, by $10 in a single trading day. During the UPA rule, between May 2004 and June 2008, prices of crude oil went up 411 per cent. Incidentally, India imports 78 per cent of its crude oil requirements. Now, consider how respective political formations responded to this increase. The NDA government increased the price of PDS kerosene from Rs 2.52 a litre to Rs 9.01 in a span of four years "" a whopping increase of Rs 6.49. On the other hand, UPA increased the price by only Rs 0.08, and that too because of VAT differentials. Mind you, PDS kerosene is used by the poorest of the poor.

NDA increased the price of an LPG cylinder by Rs 109.60 in a span of five years, between February 1999 and May 2004. UPA, in four years, increased it by Rs 33.15 in June 2006, and again by Rs 50 recently, bringing the total increase to Rs. 83.15. This is still Rs 26.45 less than NDA. Considering that Congress-ruled states like Andhra Pradesh have absorbed the entire hike and Delhi has absorbed it to the tune of 90 per cent, consumers in Andhra Pradesh would get LPG cylinders at the same price, while consumers in Delhi will have to pay Rs 10 more. Incidentally, none of the BJP-ruled states has given the same relief to consumers.

Similarly, the price of diesel went up by Rs 12.87 during the NDA rule, while it has gone up by Rs 12.02 during the UPA rule, including the current hike. Again, Congress state governments have cut sales tax and VAT substantially to give relief to the people. Similarly, petrol increased by Rs 11.77 and Rs 14.51, respectively, during the NDA and the UPA tenures. NDA increased the price of petrol 21 times and the price of diesel 24 times; UPA has hiked prices only twice during its tenure. Even now, if it would not have been for an unprecedented situation where the oil marketing companies were looking at a collective under recovery of Rs 2,45,305 crore at the risk of becoming insolvent, the UPA government would have absorbed the entire burden. Through custom/excise duty cuts and oil bonds, the union government and oil marketing companies are still absorbing 91 per cent of the burden. There was a choice between bankrupting the Navratna companies and political expediency, the UPA government chose the latter. Our friends in the Left would be better off making their state governments measure up to the challenge rather than orchestrating state-sponsored bandhs.

Does the opposition have the moral right to criticise the oil price hike? The jury is out, ladies and gentlemen.