Falling for prices

West Bengal Chief Minister Mamata Banerjee has responded with fury to the increase in petrol prices by Rs 1.80 per litre. Her colleagues in the Trinamool Congress are to discuss with her whether the rise is sufficiently anti-people to warrant the party pulling out of the UPA. She has now handed out an ultimatum to the government,demanding it withdraw the hike. Nor is Banerjee,widely known to be among the more populist of politicians,alone in her righteous rage. UPA allies have expressed their dismay; the Left,of course,is protesting. And even elements within the UPAs main constituent,the Congress,have sought to distance themselves from the decision,with a spokesperson saying that we understand the plight of the people and call upon the government to provide a healing touch.

The government has,in many ways,only itself to blame. It delayed deregulating prices for too long,and has taken the credit for keeping petrol prices low often enough for it to be fixed in the public mind as something that is within the governments power. The deregulation of petrol prices was announced in June; the idea was the oil marketing companies could then settle retail rates in line with changes in the world price. But the government was spooked about inflation,and leaned on them to postpone any changes when the oil companies sought the advice of their parent oil ministry. By doing so,the government has defeated the purpose of deregulation,which was to allow the price of oil to be depoliticised and has thus allowed itself to be cornered politically now.

That is not to say those shouting from the rooftops about this price rise have a point. Almost 80 per cent of Indias oil is imported,and so we are dependent on both the international price of oil and the exchange rate of the rupee. The rupee has been able to buy fewer dollars of late,which means oil has already become more expensive. What those opposing this hike want is not for the government to roll back this decision: they want the government to insulate oil-buyers from exchange-rate changes. That is profoundly irrational,and unfair. Our political class needs to grow beyond the puerile politics of anti-hike mobilisation,and start reading the numbers,instead.