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Journalism of Courage
The Union finance minister and the deputy chairman of the Planning Commission have said that they favour a hike in petroleum prices. They appear concerned that the policy of keeping domestic prices of petro-products low, despite rising world crude prices, will turn India’s oil PSUs into loss making enterprises. This newspaper has long maintained that the price of oil should be allowed to move along with international trends because this is in the interests of the country and its energy security. Encouraging the consumption of oil by artificially keeping prices low and thus subsidising the rich is not good economic policy. And never has populism in oil price policy gone so far as to keep oil prices pegged down, regardless of how high the price of world crude is, resulting in pushing oil companies over the edge.
Last year (2004-05), under-recoveries due to selling petrol, diesel, LPG and kerosene cheap, were Rs 19,910 crore. This year they are expected to be Rs 40,000 crore. In the April-June 2005 quarter, Indian Oil Corporation posted a net loss of Rs 54.23 crore. Bharat Petroleum Corporation did even worse — with net losses of Rs 431.30 crore. Hindustan Petroleum Corporation was the worst hit, with Rs 507.89 crore net losses. To help them out, ONGC suffered a blow. It had to dish out Rs 2,876 crore as part of the government’s subsidy-sharing programme.
Having opposed the extreme politicisation of the price of oil, we are now having second thoughts. Perhaps forcing oil PSUs into the red may not be such a bad thing, after all. Their mounting losses may actually help them in the long run, because this helps set the stage for privatisation. Remember, according to the National Common Minimum Programme, only loss-making concerns can be privatised. Once oil companies are out of the public sector, a large number of policies which at present distort the market could be changed for the better. It is often said that India doesn’t reform unless there is a crisis. The crisis of crude prices going through the roof would surely do the job.
