Econotes
Oil price hike unreasonable
By Geeta
After accomodating the Leftist friends in the Kolkata Municipal elections, the UPA Government announced a hefty increase in prices of petroleum and diesel on June 19. One of the reasons given forcefully by the cabinet spokesman was a heavy burden on the state-owned petroleum companies,both downstream and upstream. Petroleum and Natural Gas Minister Manishankar Aiyar, was reeling out figures, week before week, as to something like Rs 50,000 crore hit that would be taken by the PSU oil firms which Mr Aiyar enjoys presiding over. Right from Prime Minister Manmohan Singh to Finance Minister P. Chidambaram to the Petroleum Minister, all would argue how important it was to keep the oil companies in good health.After all they were the crown jewels of the country and they had started ?bleeding??! Let'sexamine one of this crown jewels which, according to its political masters, had suffered quite a blow. It was on the same day of the cabinet announcement, in fact with a difference of a few hours, that the ONGC reported its results in one of the most expensive five star hotels before the financial press. The financial press was quite impressed with the numbers given by the ONGC brass. India'sFortune 500 company took great pride in the fact that it had declared a whopping dividend of 400 per cent involving an outgo of 1.28 billion dollar to its principal shareholder?the Government of India. This is the performance from one of the ?bleeding?? firms!
The Finance Minister claims the price rise in petroleum products would not lead to inflation, which he says, is well under control. He would like to describe the economy as ?resilient??. It remains to be seen, however, how long the ?resilience?? would persist.
Let'sexamine another parameter about the ?precarious situation? in the petroleum sector, as Mr Aiyar or Mr Chidambaram would like us to believe. PSU firms, across different sectors,are sitting over a huge pile of reserves of Rs 259,576 crore, an amount which is equivalent to 10 per cent of the country'sGross Domestic Product. A big share of this surplus cash, as much as Rs 89,488 crore, is lying in the chest of petroleum firms. Ironically, most of these companies do not have any investment plan lined up either. While the Left parties were shedding their crocodile tears over a steep hike of over Rs 2.50 a litre in petrol and Rs 2 a litre in diesel, the Bhartiya Janata Party released figures of the tax burden on the fuel that we all use. On a litre of petrol that costs Rs 41 in the retail, the governments?both Centre and the State-net Rs 22 by way of levies whereas the landed cost, after refinery margin, works out to just Rs 17. Still the UPA Government would like us to believe as if it is the OPEC which is the villain of the piece. Besides, the Petroleum Minister would scare us, on almost daily basis as the crude oil (the sweet variety which India does not buy) touches 60 dollar a barrel. The Finance Minister claims the price rise in petroleum products would not lead to inflation, which he says, is well under control. He would like to describe the economy as ?resilient??. It remains to be seen, however, how long the ?resilience?? would persist. How long Lalu Prasad Yadav would resist revising the Railway fare because of the revision in the diesel prices. The Railways would take a hit of of Rs 325 crore but the Railway Minister would definitely resist the tariff hike as long as the Bihar elections are out of his way. Unfortunately, the country'soil economy which accounts for almost 30 per cent of India'simport bill of 106 billion dollar, will not remain resilient to the kind of politics it is subjected to!
