Blackmail on wheels

In the standoff between the truckers and the government over the increase in diesel prices, the inevitable commodity price hikes will set...

In the standoff between the truckers and the government over the increase in diesel prices, the inevitable commodity price hikes will set public opinion veering in favour of the former. The Opposition has already slapped the familiar label of 8220;anti-people8221; on the move, a label that is more mnemonic of Ibsen and Lenin than contemporary realities. The issue is not whether the price hikes will hurt people 8212; even a mental defective could answer that question without effort. The issue is whether broad-spectrum subsidies like the one on diesel do not end up hurting the people more than free-market forces. We must argue that they do, because they rob the state of the wherewithal to pursue effective welfare programmes, which constitute one of the core functions of modern government. They institute a system of welfarism while robbing the people of actual welfare.

A diesel subsidy may well ensure that what passes for the common man8217;s square meal is a bit cheaper. But it helps inflict upon him hospitals likecharnel-houses, public transport like the remains of a demolition derby and a whole battery of essential services which simply do not work. It is because of broad-spectrum subsidies that all Indians have to purchase what comes for free 8212; or almost free 8212; in every evolved democracy: essential services, housing, medical services, personal security and social insurance.

In a socialist state, subsidies are conceived as instruments of equity. They are to be made available to a section of the population to help them reduce the socio-economic gap between them and the rest of the nation. Free schooling for the children of poor families, for instance, is a progressive subsidy because it is targeted at a specific section of the population.

Cheap diesel, on the other hand, offers price cuts across the socio-economic spectrum. The tycoon benefits as much from cheap commodities as his lowest employee. A diesel subsidy does not promote social equity in any way. It simply perpetuates existing differences whiledenying the state the money for welfare initiatives.

In fact, the subsidy disproportionately benefits only one section of the population: the transporters. Interestingly, their margins, which are built on this subsidy, are never an issue in the debate. If it were, the truth would be glaringly obvious: that their strike is nothing short of blackmail aimed at retaining an unearned profit a margin that the state has been kind enough to grant them over the decades. The argument advanced by the Opposition and the transporters, that there are other sources of budgetary support, is very valid. But no less valid is the government8217;s desire to do away with a major source of budgetary deficit. The government has a right to ask for the Rs 6,600 crore that the move will mop up. At the same time, it would have been wise to project the fact that fuel subsidies are detracting from its power to run services for its people. Finally, the transporters are not operating a public service, as they seem to imply every time a fuelprice hike is announced. They are in a business for profits. But they cannot be allowed to hold the nation to ransom in the process.