This second energy crisis

We are facing two problems. One is imported energy, the other is macro imbalance. The two are interrelated, but it would be unwise to treat them as one...

We are facing two problems. One is imported energy, the other is macro imbalance. The two are interrelated, but it would be unwise to treat them as one, however comforting it is to blame the rest of the world for our woes. Incidentally a few weeks ago and for some even now, globalisation was all the good things of life. Maturity requires that the flip side is also recognised and provided for, since the global bazaar works fully and mercilessly both ways. The government is working on a strategy and it is interesting to think of its components since finally the price will have to be paid by workers, producers and consumers. We go back to earlier experiences since the devil is in the detail and much as we would like, there are no easy solutions. Some of the flamboyant gestures suggested, like asking Madam Gandhi to walk out of the coalition don8217;t further the cause of nuclear energy one bit and also distract attention from serious possibilities being negotiated. Needless to say no two situations are the same and yet successful contours of the past should be of interest.

We know from the first energy crisis that a big jump in the energy price has a macro imbalance aspect. In the first energy crisis we walked on two legs. It was savage on energy prices, petrol becoming the most expensive in the world. In Delhi officers switched to car pools and contract buses and in Ahmedabad box cars were attached to scooters, as families put cars in mothballs and the demand for petrol actually went down. All this is unnecessary now since oil imports met from reserves would in fact be deflationary, since oil purchased with dollars will be paid with rupee purchasing power, but scarcity prices have to be paid. The government is finally doing it and the cribbers will have to be exposed.

The more interesting part is the macro story. We should not accept lost years in inflation. That needs a technocratic map and a realistic negotiating strategy. It is obvious that the oil dollar effect is not deflationary enough. It would be very counterproductive to go slow on the rupee expenses on flagship schemes like the NREGS, the agricultural schemes and education and health. Something has to give. Working through interest rates is not enough and also inhibits investment. In the first energy crisis wages and profits were squeezed. It is not just the principle but the details which are important. The notion that the other fellow has to pay the price for inflation control taxes cannot be raised will not wash. If per capita income is rising by 7.5 per cent, prices can rise by 4.5 per cent, then all claims have at the margin to be less than 12 per cent, for the inflationary overhang has also to be neutralised. The details of 8220;we will all pay for it8221; can provide a base for negotiation. In the first energy crisis it was Sukhomoy Chakravarti, backed by the Planning Commission boys working with the finance ministry and convincing the PMO. Energy prices have been raised in later coalition regimes, in 1996 and so on. We need a credible roadmap and then start negotiations in the framework of carrying the political process with it.

The notion that political parties will not bite is giving up without trying. It is true that reform without consensus building is impractical. But there are also too many instances of parties accepting the second best if not the optimal answer. The Left parties were against distribution privatisation in the electricity sector. They did not allow earlier bills to be tabled. But in the late nineties a parliamentary committee met through stages all their legitimate concerns on social control of grid management, supported by the then ministry by me and a Distribution Bill was unanimously approved. This was used to push through

India8217;s largest and in fact only foreign investment in distribution of electricity. The draft bill was later incorporated in fundamentals into the Electricity Act. Political parties will react to slogans with slogans but since they represent interest groups, they have to react to detailed roadmaps with arguments.

Experts have recently highlighted the nuclear decision of the late Rajiv Gandhi, but it was a part of a holistic strategy of pushing non-proliferation globally, detailed cooperation with the USSR on the fast breeder reactors and the GSLV, with the US on strategic cooperation as also with France, Japan and Italy. With the USSR we not only negotiated the light VVR reactors and the cryogenic engines, but also laid economic relations on the fast track in the first round of reforms. The rupee was in the first basket of currencies traded in Russia and commodity trade was placed in this context by a group we chaired after the Rajiv-Gorbachev objective of 8220;doubling trade8221;. The Indo-US Technology Forum goes back to that period. The opposition to the nuclear agreement has to be surrounded in the blanket of national self-interest and all legitimate arguments on costs and national self-interest met by the external affairs minister8217;s group so that no alternatives exist. Coalitions work harder so that there is no going back.

The writer is a former Union minister for power, planning and science, and was vice-chancellor of JNU, Delhi yalaghgmail.com