[INDIA] Fuel hike

The fuel price hike was inevitable. The government has not forgotten the common man. And the state still bears 90 per cent of the burden on account of the global oil shock. This was the message Prime Minister Manmohan Singh sought to convey in his address to the nation Wednesday.

"It must be appreciated that what has been done is the bare minimum," the prime minister said in the 20-minute televised address, hours after a meeting of the Cabinet Committee on Political Affairs headed by him allowed a 9.5-11 per cent hike in prices of petrol, diesel and cooking gas.

In the speech, which also touched upon the various social development programmes of his four-year-old United Progressive Alliance (UPA) government with a clear eye on impending national elections, the prime minister urged people to understand the government's predicament.

"Business cannot go on like this for ever. We need to learn to adjust to this new international scenario. We need to be efficient and economical in our use of energy," he said, pointing out the global crude oil prices had topped $135 per barrel, against $67 per barrel when fuel prices were last raised in February.

"Our oil companies cannot go on incurring losses. This way, they will have no money to import crude oil from abroad," he said, adding: "Thus a rise in prices is inevitable."

The prime minister said despite the hike in prices of some petroleum products being permitted by his government, as much as 90 per cent of the fiscal burden had to be still borne by the government.

"It is therefore incumbent upon state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies," he said.

Yet, the political undertones of his address, given that his government has now entered an election year, were evident when he began his address by listing the various pro-poor and agrarian-centric programmes of his government.

"I am sure that all these efforts have started to bear fruit and no one can deny that we are moving in the right direction to eliminate poverty, ignorance and disease," he said.

He also spoke of the twin issues of growth and rising prices, and said inflation in India was the result of rising food and commodity prices around the world and rising world oil prices.

"I assure you our government will continue to pursue policies that will make our growth process more socially inclusive, more meaningful to all sections of society and more beneficial to our farmers, artisans, and industrial workers." Manmohan Singh's address also came after the opposition, led by the Bharatiya Janata Party (BJP), and the Left parties, which prop the ruling coalition, were unanimous in denouncing the price hike permitted by the government.

"This isn't a marginal hike. It's a substantial hike. It will have a deleterious effect. It will fuel inflation. So the Left parties will have a week-long protest from Thursday," Communist Party of India-Marxist (CPI-M) leader Prakash Karat said.

India's annual rate of inflation has topped the worrisome eight-per cent mark and stood at 8.1 per cent for the week ended May 17.

"This is an economic terror unleashed on the country. The prime minister has put another burden on the people. This will cause an upheaval in the nation. It is a black day for the country," BJP spokesperson Rajiv Pratap Rudy said.

The prime minister, however, took the line that there was no other alternative and that the citizens of India needed to adjust to the new realities of energy security and not pass on the burden to the next generation.

This global Oil Shock has imposed a huge burden on our finances and financial resources of our oil companies. In the past year alone, as oil prices doubled, our government did not make any adjustments in the price of petrol and other petroleum products. Kerosene prices have not been touched in four years.

He also sought to highlight the fact that the hikes permitted by his government also came with a cut in customs duties on crude oil to nil from five per cent and on diesel and petrol to 2.5 per cent from 7.5 per cent. Excise duty was also cut.

The prime minister, accordingly, also made an appeal to the state governments to cut their sales tax, since, as Petroleum Minister Murli Deora explained, was as high as 30 per cent or more in some states.

It is therefore incumbent upon state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies," the prime minister said.

Prior to his speech, the prime minister also constituted a high-powered panel to examine the financial position of state-run oil companies against the backdrop of soaring crude oil prices.

Source: India Economic Times

No comments: