Contradictory statements on petrol hike by Pranab in Delhi, PM at G20 summit

The Prime Minister, Dr. Manmohan Singh addressing a press conference at G-20 summit, in Cannes, France on November 04, 2011. The Deputy Chairman, Planning Commission, Shri Montek Singh Ahluwalia and the National Security Advisor, Shri Shivshankar Menon are also seen.

The Indian government has come under unprecedented criticism over its unilateral hike in petrol price, with allies in the coalition government like Trinamul threatening to quit, while the judiciary, for the first time, intervened.

The most intriguing defence of the decision came from none other than the finance minister who said the decision was taken by the petroleum companies and that the government has no role in it. Isn’t the government the major share-holder of these companies? How can they decide without the knowledge of the government? Or is the government in dark over what its own companies are doing?

The battered government finally sought succour under the fact that the prime minister is away in Cannes attending the G20 summit and the decision would be re-considered once he returned. But the decision, just ahead of his visit shows that it was taken to portray the government’s determination to end subsidies and please the world economies at the G20 summit.

“The move to decontrol petrol prices is part of the process of the direction in which we should move,” said Prime Minister Manmohan Singh. “These are very sensitive areas, I have no hesitation in saying ultimately we must allow the markets to find their own level except for those commodities that are in the nature of semi-public goods. The direction of change is quite clear, we must move in the direction of decontrolling more and more prices.”

Highly impressive argument put forth by the prime minister was against subsidies. He said: “We cannot live beyond means and we have to recognize that money does not grow on trees. We have to get fiscal system in balance. If in the process we have to cut expenditure or cut susbidies, that’s the only way you can manage your fiscal system.”

Ironic enough is that the subsidies are given on diesel and kerosene and not petrol. But in the latest move by the oil companies, petrol price is increased while the highly subsidized diesel and kerosene were spared. Far away in Cannes, the prime minister says no subsidies will exist and may even showcase the price hike in defence of his argument before the top world leaders.

“We have to get fiscal system in balance. If in the process we have to cut expenditure or cut susbidies, that’s the only way you can manage your fiscal system,” the economist prime minister may lecture to his counterparts at Cannes.

Once the show is over at Cannes, the government may roll back the prices back home.

Petrol prices were increased on Wednesday night by Rs. 1.82 a litre, the fifth time since January, aptly called a “midnight massacre”.

Apart from Trinamul’s Mamata Banerjee, other allies like Sharad Pawar’s Nationalist Conress Party (NCP) and Farooq Abudallah’s National Conference too expressed their discontent hatt they were not consulted before taking the decision.

Together, these three parties have more 25 MPs in Lok Sabha which will derail the coalition government easily. And the DMK from Tamil Nadu is already unhappy with the centre for not rescuing its corruption-tainted MPs in jail. So, the number will go up further if DMK decides to exit the coalition government.

The most-destructive reaction to the whole exercise came from the Kerala High court which has criticized the oil companies and the government for the unilateral price hike. The government is finally cornered from all sides on the issue.

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