A Molotov cocktail

That one momentous decision is going to cost the country some Rs 450 crore. For Petroleum Minister T.R. Baalu has pleaded times without number that every day’s delay in resolving the issue is costing the country Rs 30 crore.The issue should have been resolved along with the petroleum price hike last July.

The UF ducked it. It should at least have been resolved last December, when it was clear that every month of UF governance was leading to a decrease in domestic crude oil production of one million tonnes per mensem. That was not done. Failing that, it should have figured as the key issue in the debate on the Approach to the Ninth Plan.

The Approach was, however, endorsed mindlessly by the National Development Council without one question being raised about the key determinant of growth — energy. It, therefore, fell to the Finance Minister to address himself to this matter in his celebrated Budget. Instead, he resorted to one of those fatuous Americanisms he doubtless picked up at Harvard the oil deficit, he decreed, was “off-Budget”.

In consequence, the deficit in the Oil Pool Account has risen a dizzying 300 per cent over fiscal year 1996-97, from Rs 5,000 crore when the UF Government took office, to over Rs 15,000 crore at fiscal year-end. The deficit would have been nearer Rs 20,000 crore if international oil prices had not fortuitously softened in February.

The point is that, at the Baalu-estimated figure of Rs 30 crore a day, the loss to the country of the UF ducking the decision last July has been of the order of Rs 9,000 crore; of their failing to act when domestic production was known to have drastically collapsed, of the order of Rs 6,000 crore; of their failure to act in the context of the Ninth Plan, of around Rs 4,000 crore; of failing to deal with it as part of the Budget exercise, of approximately Rs 3,000 crore; and of the tragicomic non-decision of Sunday, 25 May, of Rs 450 crore (assuming, of course, that the next Standing Committee meeting will actually bear more substantial fruit).

Such monumental irresponsibility is without parallel since our last tail-wagging-the dog Government, that of Chandra Shekhar, landed us, in the space of a few dreadful weeks of misgovernance, in the worst economic imbroglio since Independence. The Gujral Government is well on its way to challenging Chandra Shekhar’s claim of being independent India’s pre-eminent nation-wrecker.

There is no way this Government will be able to resolve this issue. To think it will is to play with the nation’s poor. The root cause of the crisis is the hopeless failure of the Petroleum Ministry to jack up domestic oil production. Shankaranand had similarly failed in 1991-92. The much-abused Satish Sharma, who was appointed Petroleum Minister in 1993, turned Bombay High around and, in every successive year thereafter of the Rao Government, domestic oil production rose exponentially and impressively.

The achievements of the Rao Government have as much to do with the good Captain as they have to do with the good Doctor. Even as the collapse of oil production under the DMK’s Baalu has everything to do with the TMC’s Chidambaram.

To deal with its own inability to resolve the Oil Pool account deficit, the Finance Ministry has ordered IOC to borrow a cool one billion greenback dollars in the international capital market. This is equivalent to gouging the Koh-i-Noor out of the country’s leading Navratna. IOC will not be able to repay these billion dollars till the Steering Committee decides on, one, what to do about petroleum products prices and, two, what to do about liquidating the accumulated deficit in the Oil Pool.

The Steering Committee has before it three choices: either to accept Baalu’s proposal for a decrease in customs duties on petroleum imports; or to increase retail prices of kerosene, diesel and LPG (but not petrol), as recommended by Chidambaram; or to liquidate the deficit in the Oil Pool Account by paying over Rs 20,000 crore from the Government’s treasury to the Oil Pool Account as recommended by Sitaram Yechury of the CPI(M).

The first alternative what history will call the Baalu option — is unacceptable to Chidambaram because Chidambaram’s projected revenues, which are already way behind target, will prove impossible to reach without the massive bonus he derives from Baalu’s failure to produce domestic oil leading to increased oil imports and, therefore, increased revenues from duties on imported petroleum and petroleum products. These accounted for 43 per cent of all imports in 1996-97. How can Chidambaram forego the bonanza?

His fiscal gifts to his CII chums come entirely from the nice little nest-egg which Baalu provides him.

The second alternative — the Chidambaram option — is unacceptable to the Left, without whose support the Gujral Government cannot last a day. In any case, the price increases proposed (which, in the hallmark style of the Finance Minister, inequitably exclude petroleum products consumed by the rich) are so derisory that even if the Left were to accept the price rises, the deficit in the Oil Poll account would still remain at some Rs.10,000 crore and grow by several tens of crores of rupees a day thereafter. And the third option — Yechury’s — would fund the deficit but bankrupt the Government.

Which leaves us with the fourth option: the collapse of the Gujral Government, self-destructed by its own Molotov cocktail, followed by an election which, Inshallah, will lead to a Government which, more than survive, actually governs.