The Government went in for a partial decontrol of the prices of fuels, with giving a full decontrol of the price of petrol (and promising that future prices will be linked to international prices of crude); the prices for diesel have not been fully decontrolled, and the prices for cooking gas and kerosene have been kept away from decontrol although the prices may have been increased. The Government has been able to do this since politically the opposition is not at a very high pitch with the BJP still in some amount of disarray and no other opposition of any note.
Now, the Government is making noises about moving away from price decontrol over diesel. This is something that is much more serious than the decontrol of petrol. Petrol is perceived as the fuel for individual vehicles (and thus increase in the budget for those who can afford private vehicles), while diesel is the fuel used for the transport sector, for trucks, smaller carrier vehicles, and even for a number of goods trains that are not hauled by electric engines. The normal impact of a hike in the price of diesel is an increase in the rate of inflation, which is why the Government seems to be speaking about price decontrol of diesel, in order to gauge whether it can ride out the impending political storm.
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The Bhopal Gas Tragedy has been one of the worst incidents in the history of India, right up there with the unpunished anti-Sikh riots of 1984, and the Gujarat anti-Muslim riots of 2002. The gas attack, in the dead night of early December 1984, had a personal connection for me. My dad had been in Bhopal for a official visit, just leaving a day before; a close call for us, but not for the thousands who perished from the effects of the gas in the first few days after the tragedy. This is a tragedy that has affected many hundreds of thousands as well, those who did not immediately suffer a fatality in the aftermath of the tragedy, but who were affected due to the effects of the gas, and suffered a series of health problems that have lasted till this day, and who will continue to suffer the effects for long periods after. And yet, they can be called a forgotten generation. After all, were it not for the recent court case that awarded a measly 2 year punishment to many office bearers of the company at the time of the gas attack, who would have said a word about a tragedy that struck 26 years back ? In fact, just the fact that it took 26 years for the judicial process to grind to a decision about criminal culpabilities is itself a grotesque tragedy.
One benefit of the recent controversy has been a discussion about what are the rightful next steps to take for resolving the tragedy. For long, the factory (still present, with whatever contaminant still keeps on seeping into the soil) remains on the ground, and there had been no discussion on how to clean up the place (and one of the major steps in any industrial disaster is the clean up process of an industrial disaster); the recent discussion has been about how to setup a process to clean up the disaster area (even though there are disputes about whether it will be the central Government or the state Government that will be responsible for the cleanup process). There is also a realization that the compensation given earlier was inadequate, but the current debate overall the proposed new compensation policy is also riven by dispute, and there is a worry that there will be enough red-tape in the entire process that a number of people affected by the tragedy will continue to not get the required compensation.
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Finally, the Government seems to have taken a decision to move away from populism. The Government is drunk on the money that it earns from fuel, since it needs to provide funds for all the social welfare programs that it has launched, so there is no question of a reduction in fuel duty and excise rates. For some time now, since the Government has been in a precarious position politically, it has not had the courage (not only this Government, but the previous version of this Government, as well as the BJP Government that was ruling before that); so the Government would rather eat the extra cost and provide a subsidy in order to avoid increasing the price of fuels. Worldwide, there is a concept that providing a subsidy on fuels really has no appreciable benefit, in fact, the reverse happens. If the price of a fuel rises, and people accept that the Government will indeed increase the cost when the overall price of crude rises, then their behavior will be tempered by that realization.
A profound example of that is in the United States where the fuel prices are linked to the overall price of crude, and when international prices went almost touching $150, people changed their habit, with more car pooling, more usage of public transport, and avoidance of unnecessary trips in their vehicle. It also encouraged a strong movement towards moving towards more fuel efficient vehicles, with the status projecting large gas-guzzle SUV’s no longer being in fashion. Such is the behavior that one would want to see in Indian consumers, and our cities could do with more people trying to become more fuel efficient, going in for discarding those gas guzzlers, and more usage of public transport.
Another problem that the non-passing of such costs were that they were killing the oil marketing companies (and had already killed the concept of private companies being involved in the business of retailing petroleum products such as petrol and diesel since they could not match the subsidies being given by the Government). The amount of losses they had to bear were unsustainable, so if the Government really has the resolve to go through with this decision, then it is a good step. The next step would be for the Government to also take a look at whether the current level of excise and taxes is too high, almost like fleecing the customers.