Food prices are expected to go up by 10 to 15 per cent in the next two months and that will complicate the situation further. Starting from the morning cup of tea to breakfast, lunch and dinner and the transport to the work place, many things are set to go for a hike in the coming days. There would be an impact on the prices of grocery, milk, vegetables and other consumer products. Diesel being the fuel for transport all these will become dearer. A recent Crisil study has noted that the inflation has eroded the purchasing power of money by Rs.5.8 lakh crores in the last three years.

The opposition parties and even some UPA allies like the Trinamool Congress and the NCP have expressed concern about the latest price hike, which may rock the coming monsoon session. If there is one issue the opposition must agitate it is price rise and food inflation as it affects all sections of the people. Had Anna Hazare and Baba Ramdev focused on these two issues, the pubic backing might have been be more for them.

A renowned economist Dr. R. Rangarajan, Prime Minister’s Economic Advisory Council chairman, has predicted that inflation will soon cross 10 per cent but hopes that it may come down to 6.5 per cent by March 2012. Even if his prediction comes true, but who knows what will happen in the interim?

The situation is very grim for the Manmohan Singh government and also the ruling Congress Party. The economy despite its 8.5 percent growth is not in very good shape as the foreign direct investment has slowed down. The manufacturing sector growth is of concern. The fiscal deficit is not under control. The tax collection this year is not to the expectations. All these should worry the government.

The government as well as the Congress Party leading the UPA will have to bear the brunt of the public criticism and the opposition attack for spiraling price rise and food inflation. Even within the Congress party, the ordinary worker does not know how to explain these.

Why has the government taken this step? Petroleum Minister S. Jaipal Reddy feels that the price rise is 'moderate' and that he is getting sandwiched between economists and populists. The argument is that the price hike was to help the state owned oil firms, which were suffering from huge losses. The prices of the fuels currently are below the market prices and lose Rs. 15 per litre on diesel, Rs. 27 per litre on kerosene and Rs. 381 on the sale of average domestic use of gas cylinder. The oil companies, which are presently losing Rs 1.71 lakh crores will decrease their losses by Rs.50, 000 crores by the latest hike. The centre’s excuse is that the burden of subsidies was beyond bearable limits. The BJP argues that the total amount collected by the government was Rs. 1,35,000 crores of which the subsidy was Rs. 40,000 crores.

There is no point in raising alarm every time the prices go up. Instead the accent should be on a long term and transparent energy policy and oil policy. First of all there should be efforts to reduce the dependence on oil import. It is time that the government thinks of dealing with the situation and look for ways to reduce oil imports. The country has a huge deficit between demand and supply and there should be ways of bridging this. Wastage should be stopped forthwith and luxury cars and SUVs should not be encouraged. Secondly, alternate sources of fuel supply should be encouraged like use of electric cars. Thirdly, experts say that the oil companies have a cartel and do not allow a market price to prevail. Therefore if other players come in, the market will determine the prices and the monopoly would end.

Fourthly, as the BJP demands a transparent oil pricing formula should be explored although during the NDA it did not think of it or a proper energy policy.

After the recent fuel hike, the states are told to share the burden by reducing the cess and VAT. Some like West Bengal and Haryana have already taken lead and others are to follow soon. The competition between the UPA ruled states and the NDA ruled states might ultimately benefit the consumers if they reduce the cess. However, it this is to happen, the centre should consult the states before hiking the prices.

The price hike will add fuel to the fight between the government and the opposition. The people are restive and at long last, the opposition has got a perfect opportunity to take on the Government. More and more corruption cases are coming up and there is bitter infighting within the Congress. The BJP itself is not in a very comfortable condition but the mass mood at the ground level is very much against the Congress and the Government. The Left could have effectively exploited the situation to its advantage but the CPI-M is so demoralized after its debacle in West Bengal that it has failed to take any initiative and so the ground is open for BJP and its allies to launch movement. What better way than to attack the government during the ensuing monsoon session? The opposition, instead of resorting to usual walk- outs and making noise should use the session to thrash out the issue and come out with some constructive suggestions. (IPA Service)