Few will disagree that the Congress party's election victory had cost the national exchequer a sizeable sum through such populist measures as the writing-off of farmers' loans, Bharat Nirman and rural employment guarantee programmes and also a cut in oil prices, zero-duty import of certain essential food items, etc. The party, now back in power, is not grumbling. In its post-poll analysis, the party has publicly credited its pro-people measures for its good showing in Lok Sabha election.

If this open admission by Congress stalwarts of what turned the voters on is to be believed, why are some of its ministers now singing anti-people tunes? Why is the Petroleum Minister going full steam to reverse the nearly-four-decade-old price control mechanism for essential petro-products within less than a week of his reoccupying the job in Shastri Bhavan? The proposed measure will certainly help a handful of the country's oil refining and distribution companies and lighten the subsidy burden on the exchequer. But, will it help the general public, especially those living on Rs. 100 to Rs. 150 per day and who constitute nearly 60 per cent of the population? The latter had stamped their faith in the party and the government in the belief that it would continue to protect their interests after the election.

Petrol, diesel and cooking gas can't by any standard be considered a luxury now. For a very small section of the people, including some high net-worth ministers in the government, it won't really matter if the prices of petrol and diesel go up by 50 per cent and those of cooking gas by 100 per cent or even more as a result of the proposed introduction of free-pricing mechanism based on distribution cost at the retail end. However, such a measure could ruin the life of the rest of the population and lead to massive social unrest. Diesel accounts for about 20 per cent of the country's electrical energy generation, which benefits not only farmers running pump sets to water their land, but also small traders, tractor operators, bus operators, taxi drivers, motor cycle and scooter owners, domestic consumers, etc. A substantially higher petrol and diesel price will affect them all. It will push up the industrial cost of production, power generation and force the railways and the road transport services to raise their tariffs to levels beyond the reach of the common man. It is bound to bolster the inflation index. In turn, the entire economy will be hurt.

What happens to the people and economy under a free-pricing system, if the petroleum crude again soars to $150 per barrel or more? Will the government let the seven oil majors unleash their oligopolistic pricing tools to take the nation for a ransom? What happens if India is involved in a war? Why tamper with a time-tested system which has contributed so much for the economic stability and social unity in the country? And, more so, when the key to the country's energy security is in the foreign hands? India is terribly short of petroleum, natural gas and coal. Imports account for about 80 per cent of our annual oil consumption. Coal too is being partly imported for both the metallurgical use and power generation. Can the country afford to leave the price and distribution control of petroleum products with the oil companies?

For the champions of oil price de-control, it may be time to look back and rationally assess the reasons or the logic behind the Central Government subsidies and price controls on critical items such as fuel, fertiliser and food. The decisions on these subsidies were not taken by any of the opposition parties of the present United Progressive Alliance constituents. They were taken by the Congress Party's economic think-tank in the 1950s, 1960s and 1970s. These policies have kept the country and its majority poor people together. They have kept its economy going. The government was forced to raise revenue resources from various other sources, including borrowing, to support the subsidy system over many years. They had, in turn, helped higher production of food grains, cheaper transport, cheaper electricity, better industrial output, better life and less tension for the administration. The exchequer was always under pressure to strike a balance between the increasing cost of subsidies on these essentials and revenue generation year after year.

It is true that the total cost of these subsidies has reached very high levels and will be difficult to sustain over a period of time without proper planning and financial adjustments. For this, the experts in the government have to sit together and come out with policies to chalk out viable long-term solutions that will protect the interest of the common man and the national economy. One way to handle the burden of oil subsidy and below-cost retail prices of certain petro-products would be to drastically cut the duties and levies on petroleum and products at various points. A small experiment on this by the national government, supported by certain state administrations, last year, proved to be rewarding. This was after the government was forced to raise the prices of petrol, diesel and cooking gas as the international oil prices hit the roof at $150 per barrel and the domestic oil companies were losing crores of rupees per day on their retail operations. The positive result of this experiment calls for a total relook at the duty structure on crude oil and refinery products at both the national and state levels and arrive at a consensus with the state governments on the future course. High incidents of duties and levies and low pricing models can't go together.

Finally, every paise saved is every paise earned. A lot needs to be done and can be done at the producers' and distributors' levels to compress costs, which is unfortunately not happening. There exists a great scope for cost cutting and efficient waste management by the domestic oil companies. Also, the petroleum companies are making good money on refining margins. Reliance Industries made a $2 billion profit mostly out of refining margins in 2008. The domestic oil cartel must look at the business in totality. The separation of the cost of marketing and sales operation from that of refining can't be regarded as a fair process of accounting. The government must take into consideration all aspects, especially the social impact, before it take steps to deregulate the oil sector. (IPA Service)