Fuel for Thought

11/11/2011

As a lazy cub reporter one of the greatest joys was to get a simple story that was bound to make the headlines – like the one that did last week – petrol prices on a high five ( five hikes in last year) . This means you now pay 25% more than what you paid last year-  that’s more than twice the over all inflation . It also means, at one and a half dollars per litre, the  Mumbaikar now pays one and a half times what the Newyorker pays to tank up . You will now  shell out a lot at that Shell pump. But the bigger story for me came the day after  with the demand for a roll back  on the hike by the opposition as well as government’s  allies. This time too rollback has bee done  although well camouflaged as a reduction in prices . Historically , almost one out of every three price hikes is followed by a rollback –partial or complete .  This brings me to the functioning of  the Indian governance  — where actions precede systems,  plans  and even thought . Decisions either precede discussions  and then there are discussions which never lead to any decision . Most often , rollback demands are  merely political posturing but failure to enforce a rollback doesn’t leave that posture very erect

Every action has an equal and opposite reaction . In india every reaction has an equal and opposite action . First acts are done or allowed to be done , then there is a reaction which is  opposed with a stronger action. As a result you have fully constructed buildings being demolished ,land laws being misused and then changed , trees growing in the middle of the road, road side temples coming up at will , roads being perpetually relayed  — either to lay an electric cable , a telephone line , a sewage system or simply because of poor construction . More recently we had a strict ruling on unsolicited text messages .There too we now have a partial relaxation and the mobiles have again begun to ring or ping .

So why does this happen ? Why does  CHAOS become  an acronym for Controversial , Haphazard and Arbitary Operating Systems ?.It boils down to a very selfish society . The ‘I” in India could not be more pronounced . Clean your house but dirty your road  . Its is this selfishness which promotes greed which then leads to control , then corruption ,then controversy and finally the above mentioned chaos. Not to forget the  weak legal system which actually strengthens this chaos. The  same law which is flouted to start this menace is used to stop it and then re start it . Indians always get it right, only after they have tried everything else   . 

Back to fuel , the game ( colloquially called “tel ka khel” ) actually resembles a very successful bout at the bowling alley with plenty of strikes! — US, Israel may strike Iran ! Oil prices soar and oil stockists strike it rich ! Government strikes a note of discord as it hikes fuel prices ! The hike leads to protests and strikes by opposition parties !  — the same old roundabout . What strikes me most is this predictable trend in a commodity whose price is said to be most unpredictable , driven partly by speculation and mostly by manipulation. Energy (vigour) is an essential ingredient of many a great men and many a great performance. Energy ( fuel) is also an essential ingredient of many a great nation and many a great conflict- be it Afghani or Ambani  . Literally speaking , oil fuels war and war fuels oil prices.

Solutions !  –obvious  ones would  be renewal energy , alternate fuels, new sources of power, bio fuels ,fuel efficient technologies and nuclear energy . These aside in India’s case two specific solutions would be infrastructure and subsidy . Start accelerating the former and stop disseminating the latter . The former is  continuous and will impact gradually. The latter is sudden and shall impact immediately. Better infrastructure would include better public transport , rapid mass transportation system , better roads which would increase mileage and reduce fuel consumption, better town  planning would mean lesser traffic lights and thereby lesser fuel consumption and lesser time on roads and thereby more productive hours. What’s more it would encourage walking and cycling which means better health and lesser spends on fuel. A cleaner Yamuna with Gondolas to ferry you across – no fuel , a fascinating experience and  some employment generation – that’s just too much, I guess.

Subsidy is the biggest eyewash in any economy . Overtly a give away  to the needy , it does’nt give the correct picture of the state of affairs. India’s oil subsidy bill is a big drag on the exchequer. Abolishing it and allowing market forces to take over will dramatically reduce our fiscal deficit ,an important benchmark for any developing economy . Subsidies sell promises  and buy votes. That the benefits of subsidies are usurped by middlemen is another matter . Subsidies prevent  conservation and thereby discourage  efficient use of fuel as we start taking the grants for granted .The conservative economist applauds the conservation theory but  argues against removing subsidies  saying it would push up transportation costs and thus be  inflationary . Sure it will but this shall be offset by better infrastructure  which would then  reduce those very transportation costs . Besides there is no rationale to provide subsidy on diesel to run a BMW on the Delhi roads or for that matter to the rich farmer who anyways pays no tax and gets free power . Then, why give five shocks ( oil price hikes) in a year. Stop subsidy , link domestic prices to international prices and do away with this controlled menace . The shock will be felt once . It will be  dramatic  but  the realization once made would be permanent. Ethically too , India imports  70% of its fuel requirements and direct linkage to global prices are  justified . Also don’t forget international prices don’t always  go up. On its part the government can continue to encourage foreign investment which would strengthen the rupee and mitigate the impact of the rising crude price  .Half of what we pay at a petrol station goes towards taxes. Rationalising taxes would certainly help 

A final thought would be a pipeline from Iran, originally planned through Pakistan but now being contemplated through Afghanistan . Chances are remote , yet possible. As John Lennon would say “Imagine “.   I simply say its at least fuel for thought.  

Please send your feedback to chetansharma1@gmail.com

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