Wednesday, May 23, 2012

Finally a bold and good decision….

Raising petrol prices by Rs 7.5 per litre is a gutsy decision no one expected the UPA to take. I am happy that the Government has finally decided to move on this festering issue.

There are clearly many dimensions to this subject. For instance, the tough decision indicates a new political alignment taking place. A day back, Mulayam Singh Yadav was the special guest at a UPA celebratory dinner. I haven’t heard too many comments from him today except some muted chiding of the Congress. Was the price hike discussed with him? Given his secure position at home, has he decided to back the Congress for gains elsewhere? Is this why the Congress has managed to cock a snook at Mamata? She claims she was not consulted. But curiously, the queen of threats and tantrums has not threatened to pull her support out. Why? Does she also realize that with Mulayam cozying up to the Congress, her own venomous sting has become a little less potent? Very interesting……and if this analysis is correct, we could be in for the passage of some more “reforms”. I put reforms in quotes since a petrol price hike can hardly be called a reform at all. The real reforms are waiting in the wings – waiting for Mamata to give the green signal. Will these reforms finally take off with Mulayam’s tacit support?

The steep price hike also shows how inept the Congress has become at basic politics. All the experience of the past 50-60 years has come to mean nothing. Why would they increase prices so steeply and after so much time? Wouldn’t it be politically more palatable if the same Rs 7.5 was increased over three or fours steps spread over a year or so? And if a cut or two was thrown in in-between? But somehow this political gumption has been missing for some time now.

One other thing is clear. In its choice of tough options, the Congress is happy to junk the urban middle class. It will do all it can to protect its core constituency – the rural poor. The farmers, the unemployed, the poor, the underprivileged. Those are not hurt by a petrol price hike. Only the urban middle class – mainly those who ride two wheelers and the few who are still left driving petrol cars are hurt. But in the political numbers game, this is the most easily sacrificiable lot. In any case, this lot was never a great fan of the Congress – the rare exception being in 2009 when it backed Manmohan Singh for his gutsy Indo-US nuclear deal.

Will the UPA government decontrol diesel also? No way. That would really hurt. That would hurt the farm sector. That would hurt the transport sector. And that would hurt the inflation. So those of us who drive diesel vehicles can – with lots of shame no doubt – continue to live in a world of fake make-believe.

Is the petrol price hike justified? I think so. I think petrol prices will and should rise to Rs 100 – so that petrol consumption drops. That and that alone will give a fillip to public transport in this country. Today, no one wants to travel by public transport. The government also doesn’t prioritize investments in public transport. Even the courts have directed the government many times to work on such schemes, but no real movement has ever taken place. The high cost of petrol alone will force the people to support an aggressive nuclear power policy. Nuclear power should fuel our public transport system. That is the only way to control transport costs. The truth is that crude prices are only going to increase in the future. That future is not very far away. It may be 5 years away; or a max of 10 years away. If we have to work on cutting our crude consumption, the time to start is now. But with the kind of political system we are seeing in the country, where every single decision is debated ad nauseum and usually shelved for want of a consensus, no decision making takes place. Even a ready power plant like Koodankulam is permanently under debate. Ridiculous.

Is Mulayam going to side with the Congress for the next two years? I can only hope so. The biggest political no-no for the SP (and even the BSP) in UP is to be seen doing anything with the BJP. If the BJP opposes a particular Presidential candidate, the chances are that the two UP parties will support that candidate. If the BJP complains about the petrol price hike, chances are that these two parties will keep their criticism muted. Between the Congress and the BJP, the Congress is a far more acceptable partner for the UP parties. IN many ways, the poor showing of the Congress and Rahul Gandhi in UP has ensured that the SP and BSP continue supporting the Congress. The myth of Rahul has been contained – at least for now. Supporting the Congress can earn rich dividends in UP – budgetary support for populist schemes being only one of them.

So I am happy the Congress has bitten the bullet. It’s a good decision. Maybe the Congress will dare Mamata a little more and push ahead with some more legislation – at least the ones where the BJP has agreed to support. The Banking reforms, the pension sector reforms can all be passed now. Mulayam’s and Mayawati’s support can also help pass the Lokpal Bill in Rajya Sabha, and that act should ease pressure on the Congress too. If all of this is done quickly, maybe….just maybe….we can have a government that takes decisions. The policy paralysis has been the biggest reason for our slowdown.

The real truth is that the decision to increase petrol prices is a good one. People will complain, but then these are tough times. Tough decisions need to be “sold” to the people….that’s where the problem lies…..

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