Economist Manmohan Singh also stands for pragmatic approach to both macro and micro-economics as they evolve in the changing world economic order. In international forums, he is revered as an economic philosopher and is heard with rapt attention by heads of G-20, G-8, G-77, G-4, ASEAN and SAARC countries. Starting as a socialist economist in the 1960s, ’70s and the ’80s, Dr Singh did not hesitate to embrace the IMF-World Bank chartered economic reform agenda when it become imminent to save the country from an external payment crisis and insolvency in 1991. He held the finance portfolio in the union cabinet, then. Narasimha Rao was the prime minister.

But, Dr Singh did not rush with the process of reform despite pressure from the Fund-Bank management and other multilateral agencies. He was never known to have rushed into things. Such a thing had been against Dr Singh’s very characteristic traits. He would think, learn, comprehend and get fully convinced before implementing an idea. Yet, his initial experiment with the stock market reform in 1992, leading to the closure of the office of the controller of capital issues and the stock exchange division in the union finance ministry, could not prevent the biggest-ever market scam with more than 4,000 fly-by-night companies disappearing with thousands of crores of rupees of public money. Banks, institutions and the ordinary public invested in those firms as their promoters, a bunch of corporate con men projecting themselves as merchants of dream, promised moon to the investors. Well-known merchant bankers, including those from nationalized banks, equipment lease providers, issue managers and auditors, were all involved in falsification of statements by corporate promoters with regard to completion schedules and financial projections of those projects in the offer documents.

During those heady days, the late Bombay “bull” Harshad Mehta duped several government and co-operative banks, including the National Housing Bank, a Reserve Bank subsidiary, the Unit Trust of India and State Bank of India, to raise funds to manipulate the market. Even a well-known foreign bank, Standard Chartered, was not spared. In one occasion, when Dr. Singh was confronted by media persons for his reaction to the massive market manipulation by stockbrokers and corporate promoters, his typical response was that he was not fully conversant with the nitty-gritty of the market. His famous quotable quote was: “My knowledge of the market does not go much beyond (Delhi’s) Khan Market.” The socialist economist-turned the first reform-era finance minister is today the Prime Minister of the country-- the home of the world’s largest number of poor people, almost 33 per cent of the global able-bodied poor population living on an average daily income of less than US$ 2 per head – for the eighth year in succession.

It is because of this reason it is difficult to believe what the local media reported about the Prime Minister’s reaction to the first-ever withdrawal threat from the UPA government by Trinamool supremo Mamata Banerjee and her party colleagues over the 11th time petrol price hike in just about 12 months by domestic oil companies, mostly public sector undertakings. The Prime Minister, attending G-20 summit abroad, had reportedly said the oil price increase was inevitable and he had “no hesitation to say that markets will find their own levels.” If the report is true and the Prime Minister meant what he said, India’s 800-million poor and another 200 million people of the middle-class background better be prepared for a much bigger price shock in the next 24 months if the Congress-led united progressive alliance (UPA) continues to be in power. Petrol and diesel prices could top the Rs. 100-per-litre mark, 14.2-kg cooking gas cylinder over Rs. 1,000 each and the prices of Kerosene, engine oil and lubricants would go through the roof.

What about the prices of coal and commonly used nitrogenous fertilizer and electricity tariff? Will they also be guided by market forces? Will their prices be determined as per the demand-supply equilibrium or vice versa? The price of every commodity and tariff for every service – the railways, the road transport, merchant marine and civil aviation – will go through the roof. A runaway inflation, followed by recession, will grip the Indian economy. Nobody in India understands this better than the Prime Minister. It is possible that the Prime Minister was just “joking”. Probably, the Prime Minister, in his disgust, will at some stage be his old self to use a whip to re-regulate the oil price. If the government can deregulate, it can also re-regulate should the immediate beneficiaries of deregulation misuses the gesture. There can never be a situation under which a national government irrevocably surrenders its sovereign right to administer and control entities.

What is the real truth about the losses being reportedly incurred by petroleum marketing outfits? How reliable are their accounts? What is the extent of leakage, if any, in marketing and distribution? Could a better cost control and distribution supervision system by oil marketing outfits improve the bottomline of these operations? After all, refineries are making huge money. Reliance Industries (RIL) is earning huge profits. Exploration company, ONGC, has never made such large profits. Maybe, the balance sheets of these oil firms need to be more carefully revisited and special audit conducted before they indulge in fresh price hikes. Is the government under pressure from foreign oil marketing companies such as Chevron, Total, BP, Shell and Exxon-Mobil for total price deregulation in the petroleum sector? Shell, which has quietly entered India’s retail market with outlets in South India, is said to be making losses because of the price control.

The government need not be apologetic about subsidizing the oil sector in greater national interest. If necessary, it could ration the distribution of petrol, diesel and cooking gas. There is no country in the world which does not subsidise its economy, one way or the other, in the interest of its people and protect domestic enterprises against external commercial attacks. Even the USA, long regarded as a bastion of capitalism, had to make the most sweeping government intervention in private financial markets taking over on September 7, 2008, Freddie Mac and Fannie Mae, home loan mortgage giants, in a $ 140-billion bail-out action. In the last G-20 meet, which our Prime Minister attended, President Obama refused to join the European Union (EU) on the proposed financial transaction tax on trades of stocks, bonds and derivatives in the interest of global US banks. Large US banks are heavily subsidized by the federal government to help them tide over the present financial crisis. Left to market forces, several of those US banks would have permanently shut down by now. Heavy domestic subsidies helped Japan to emerge as the world’s second largest economic power until last year when the People’s Republic of China snatched away the position from recession-hit Japan. The export-led Chinese economy has been thriving on multiple subsidies, including the rigged exchange value of its currency, Renminbi (Yuan). Between 1962 and 1982, China did not allow any domestic wage-price distortion by market forces, controlling both wages and prices with iron hands.

Food and energy prices and the stability of the financial system have been a prime concern of governments across the world. Well-meaning governments all over the world regulated these markets whenever any of them threatened to go out of control causing misery to the public, the general business scene and the nation. The food subsidy, energy subsidy, including oil, the stable financial system and the massive public investment in the core and infrastructure sectors have significantly contributed to India’s economic growth over the years. The government has long stopped fresh investments in its public sector. It has been disinvesting its equity stake in profit-making, heavyweight PSUs to reap the benefit from past investments and make money. The government’s tax income has increased many-fold in the last 10 years. It has even washed its hands off the social infrastructure building by privatizing education, healthcare services, sports, parks and stadiums. Even the public security has been partly privatized with private security firms being increasingly engaged to protect life, liberty and property of private individuals and corporates.

Why is it important for a handful of energy companies, the biggest single contributors to the national and state exchequers, to make more money at the cost of the public and the rest of the economy? If necessary, the government can subsidise the entire energy sector, including oil, by returning a part of the revenue it collects from the oil and gas firms and coal and electricity companies. Such a gesture will bring to bear upon a more positive effect on the economy and the price structure of essential commodities and key industrial inputs. Energy prices in India are among the highest in the world despite the fact that the per capita energy consumption here is among the lowest compared to other large and potentially sound economies. It may be suicidal to leave India’s energy markets find their own levels. No one expects Dr Singh, the Prime Minister, to be a cause of such a disaster. (IPA Service)