New Delhi, Sept 19: While petroleum minister Ram Naik has been playing to the gallery by writing concern letters to the OPEC over the havoc created by the massive $34 a barrel oil prices, the fact is that he is largely responsible for the mess the country is in today. Masterly inaction by his ministry, and the government in general, will result in an additional burden of a whopping Rs 20,000 crore on the oil pool deficit for the full year. In fact, one of the first tasks that awaits Prime Minister Atal Bihari Vajpayee on his return from the US is to unravel the mess. Today, with the oil import bill likely to be in the region of $14 bn, and the oil pool deficit currently in the region of Rs 19,000 crore, the government has no option but to raise fuel prices steeply. The reason is simple. The government subsidises kerosene and LPG consumption - and even diesel, though by default - but does not wish this subsidy to get added to its overall fiscal deficit. The subsidy on an LPG cylinder, for instance, is Rs 163, while that on kerosene is Rs 5.8 per litre, and that on diesel is around Rs 3 a litre. The oil companies are forced to finance this subsidy, and the government promises to pay this back to them at a later date - this is called the oil pool deficit. But with the oil pool deficit at Rs 19,000 crore, this means the oil companies such as IOC and HPCL are completely starved of funds, and have to borrow funds at higher interest rates in the market. Since the oil pool deficit is expected to go up to Rs 28,000 crore by March next year due to the increase in global oil prices, the government now plans to increase various fuel prices to keep this deficit in check. For if it reaches the Rs 28,000 crore level, the funds-starved oil PSUs may not be able to finance even their oil imports in a few months - much the same thing, incidentally, happened three years ago. The point, however, is that today's crisis on the oil pool deficit is almost entirely of the government's own making. As part of the process towards decontrolling and freeing up the oil sector four years ago, the United Front government had, for instance, agreed that diesel prices would be adjusted periodically to keep them on par with global prices. Once the Cabinet took this decision, it was then a routine administrative decision to change prices each month. Instead, successive petroleum ministers, including Ram Naik, have politicised the decision, taking it to the Cabinet to clear. As a result, diesel prices were last raised well over a year ago, during which global prices have gone up by around Rs 3 a litre. This alone adds up to an additional subsidy of a whopping Rs 16,500 crore. Similarly, the same Cabinet decision declared that the subsidies on kerosene and LPG would be reduced by around a third each year till 2002 - when the sector would be completely freed - and the balance subsidy would be taken on to the general budget. Based on this, in the current year (the government does have till March 2001 to do this!), the subsidy on kerosene has to be cut by around Rs 1.9 a litre and that on LPG by Rs 50. Based on current consumption levels, that adds up to Rs 2,500 crore for kerosene and Rs 2,100 crore for LPG. Given the level of pussy-footing by the governmnent on the issue for well over a year now, it's reasonably clear that despite the current crisis, the government will not hike prices by the required amounts - that is, the amounts the United Front Cabinet resoution had committed to four years ago. So, when the oil pool deficit rises to even more unmanageable proportions, don't blame just the OPEC. Blame the government too.
