Too slick for comfort

The ideal solution to the dispute in the cabinet over oil prices would be one that both Mamata Banerjee and Ram Naik can live with, if not claim as a victory. Token cuts in the prices of kerosene and LPG cylinders would come closest to such an outcome and a compromise on those lines at Friday’s cabinet meeting is widely predicted. Slicing 50 paise off the price of a litre of kerosene (after a Rs 3.50 hike) and Rs 5 off a gas cylinder (after a Rs 30 hike) might seem to some as capitulating to blackmail. Certainly the Union petroleum minister has calculated the loss to oil companies from such reductions and pronounced himself unhappy. The fact is, however, a degree of flexibility is necessary. As long as it does not go beyond a token rollback there is nothing very seriously wrong with it. It would be unrealistic not to expect pulls and pressures from coalition partners and to make adjustments for them.

It is not beyond the realms of possibility that Banerjee’s little drama was anticipated. She has, after all, staged something similar often enough in the past, most recently early this year when kerosene and LPG prices were raised. So it would not be surprising if a small margin was provided for — a giveaway for the Trinamool Congress leader, so to speak — when sweeping, unusually bold oil price hikes were announced over the weekend. But it would be an altogether different matter if the Cabinet on Friday were to go further than a few paise here and there. That would be damaging for the public sector oil companies and government finances — since the government would eventually have to bail out the oil companies — and would definitely invite political blackmail in the future. The prime minister should finesse the price hike to keep testy partners in line, but no more.

It is an abiding mystery how the cabinet system works in the NDA government. Specifically how does Banerjee manage each time to oppose controversial cabinet decisions, post-facto and after they have been publiclyannounced? It would be interesting to know if she contributes at all to policy-making or only reserves for herself the luxury of protesting against politically unpopular decisions. A responsible minister and a senior one at that would be prepared to share the brickbats and the bouquets with her colleagues. While it remains to be seen what the final outcome will be on Friday, one thing is clear. As long as the administered price mechanism is not dismantled, politics will remain in the driving seat and it will be touch and go whether rational economic decisions will be taken and taken in good time. When the last United Front government decided it would progressively start pegging petroleum and petroleum product prices to market prices, it was hailed as a bold and pragmatic step. Optimism was short-lived. Neither the UF nor the BJP-led coalition governments which followed have found it politic to stick to that hard discipline. The result has been rising oil pool deficits and crisis management. After it has donewith putting out fires, the Vajpayee government must turn its attention to allowing international oil prices to trigger the ups and downs fordomestic oil prices.