Tags:
Journalism of Courage
It is surprising that the government has decided to roll back the planned increase in the price of LPG. Surprising, because even though this price hike was unpopular, it had not raised hackles to the extent that a rollback was justified. Given the enormous increase in the world price of crude oil, people had expected prices to go up. If the move was meant to satisfy the Left, it is even more odd. After all, India8217;s LPG is consumed by the middle class, whereas the Left is supposed to be championing the cause of the poor.
From a government that is committed to pro-poor growth, people would have expected a shift away from the trend to subsidise the affluent. Resources in the economy are limited and the opportunity cost of giving a subsidy to one section of society is to take it away from another. Pro-poor policies consist of increasing the share of national income consumed by those below the poverty line. There is no case for giving a higher subsidy to the affluent. This will, in no way, improve the lives of those who remain in deep poverty. An additional flaw in the rollback is that it is not being replaced by an on-budget subsidy. Oil companies are supposed to continue cross-subsidising LPG. Later, when oil companies ask for higher protection and profit margins, because they are meeting the political objectives of the government, the government will be unable to resist the pressure to distort tariffs and prices to favour them. Even if the government wishes to continue the subsidy, it must clearly pay it out of the budget.
