OIL MEN, OILY MATTERS ...

Despite being a cynic, I was one who had always  believed that even to the darkest cloud, there would be that wee bit of a silver lining.

For once, am I not right?!

If it wasn't for that hefty and hurried post-election hike of Rs 5 in the price of petrol, how many of us would have bothered to stop and ponder the clever money-making tactics of the corporates and their cronies in the ministry? It is a fact that the slow and steady squeeze was on the consumer and the tax payer for long. Those who have a longish memory will recall the "Gulf war surcharge" that was put on fuel by the government when there was the Kuwait war. The knee-jerk protests of the political parties promptly came in its wake. But when the war ended, nobody, not even the 'watchdog' media, remembered to bark against it.

If you rewind a bit and put two and two together, you could very well see when the price decontrol fever started. The Niira Radia tapes had revealed how ministers like Raja and Deora were put into place by the interested corporates. And everybody who knows our corporates --no need to mention names; they are all the chips of the same old block!! -- knows how they go about getting things done with a large bucket of grease for the palms of the ministry honchos.

The other day I heard our FM Pranab whining that it was all the doing of the oil companies. Poor man, he was trying his best to scare the inflation to go away, and here were these heartless oil chaps playing havoc with his well-laid plans to contain inflation and make this India a heaven for the 'aam aadmi'. The FM and the PM (himself a financial wiz!) sadly seem not have noticed that the increase in fuel prices are likely to affect anything and everything, either directly or indirectly. You cant fault them; while studying the economic impact of such measures in minute detail, it may not be possible to notice such 'affects' that might immediately occur to the 'common sense' of the common man in the street.

All I wish to say about it is, with their demonstrated 'acumen' in economics and planning, these guys won't make the grade even if the corner paanshop was recruiting somebody to mind its accounts. Ah, perhaps "scientific economics" was somewhat counter-intuitive! How these guys are continuing to formulate this great Nation's economic 'policies' is a mystery to me. Dont we have some guys who understand "straightforward economics" in this country?

We think these guys are idiots who do not understand profit and loss and inflation and such stuff. But, NO!! On second thoughts, I dare say they ARE intelligent beyond measure; the problem is that we are not wired to see their reasons and reasoning, and their formulae with "secret ingredients" that make them do what we ultimately think is a foolish approach that compounds the problem. A look at a few things that have blended into the background will reveal their very clear thinking and their purpose.

The other day I received an SMS. This is what it said:

Petrol (per litre) prices in:
Pakistan - Rs 26
Bangladesh - Rs 22
Nepal -  Rs 34
Burma - Rs 30
Afghanistan - Rs 36
India - Rs 67
-------------------------------------------------
Basic cost - Rs 16.50
Central taxes - Rs 11.80
Excise duty - Rs 9.75
State tax - Rs 8.00
Vat/cess - Rs 4.00
Total - Rs 50.05
-------------------------------------------------

Simple arithmetic (easy! we can work it out ourselves; this is not running into lakh-crores to boggle our minds!) tells us that the cumulative taxes work out to more than TWICE the basic price of the stuff. And as the taxes are computed as a percentage of the price, every time the price goes up, the "cut" of the government too goes up! No wonder like brothers in thievery, there is this unbeatable nexus of the cronies! I haven't bothered to check the comparative pricing in the neighbouring countries. You could do that if you have some contacts here and there. But you dont need to do any comparative study to see that this is a grand rip-off.

I phoned up a couple of friends in the industry and they confirmed most of our worst fears about pricing, about the interntional fuel trading sharp practices, futures trading etc. But ther is really no need for us to go into all that, or understand all that, in order to question the logic of our ministers and their minions when it comes to "policies" on fuel pricing.

There are other little-heard stories to fuel pricing that will take us first to the high altifude games in the aviation fuel sector.

At a time when the "aam aadmi" was charged Rs 60 plus for a litre of the kerosene-laced stuff called petrol all over India, jet fuel was going for less than Rs 45 a litre! By now the country is privy to the  heavy and continued losses that Air India have been incurring and how it was the need of the hour to "get rid of it" to save the national waste etc etc. In a magnanimous last-ditch gesture to save the national carrier from its loss trap, the government, in 2008, wrote-off the excise and customs duties on aviation fuel. What a patriotic and timely action, we all thought! However, not only did Air India fail to get out of the red, but they drove the staff into another wave of strikes, pushing the airline into a deeper abyss of loss and debt.

But Air India's loss was the gain of the other airlines--all private players and "cronies" of the government. How? When the government so charitably wrote-off the duties, it was not for Air India alone, or for a limited period. With a fell stroke of the pen, they just abolished the duties on aviation fuel! And all the private airlines were(are still!) flying about on the cheaper fuel and raking in hefty profits --putting the entire subsidy burden indirectly on the poor man in the street  who pays dearly! What a Robin Hood-ian technique of robbing poor Peter to pay Paul a grand subsidy!

For the sake of a record here are the prices as on 17th May, 2011:
Petrol - $ 128 / barrel
Aviation fuel - $ 135/ barrel

This is what ultimately translates as Rs 67 for the man in the street and less than Rs 50 for the "high-flyers"! Surely airline companies too, like 'good' businessmen the world over, are willing to "kick back"  a percentage of the profits that they make as a result of this largesse at the expense of the tax payer.

Do you still think that our ministers are embodiments of stupidity and they dont understand economics? The laugh, dear reader, is on you ...

If you think that the 'subsidy game' is limited to aviation fuel, think again. Diesel right now happens to enjoy subsidies along with kerosene and cooking gas. When we think of diesel, the common man naturally thinks of the railways, the backbone of the nation, and of the road transportation network, the life-line of the country.

But no, there is another large group of diesel consumers who are quietly consuming all that they can without getting into any loud controversies and without rocking the boat. No prizes for guessing who this new breed is, though I am sure you may not come anywhere near the truth with your guesses. They are the mobile companies. Mobiles ran on 2G or 3G, we all thought. No sir, all their towers run on diesel gensets, and with electricity "service" being what it is in our country, you could imagine the huge quantum of diesel that would be needed to keep the networks alive.

Greenpeace, the environmental NGO, has estimated that the exchequer loses a whopping Rs 2,600 crore annually as a result of the 'subsidy' enjoyed by the mobile companies. (http://www.greenpeace.org/india/Global/india/docs/cool-it/reports/telecom-report-may-2011-web-optimized.pdf )   And are we naive enough to believe that the government is ignorant of all these goings on in the country? If they really are, then it is best that we are rid of such a body of worthies called a government--ASAP!

Add to this the growing trend of "portable power". Thesea are huge diesel gensets mounted on trucks that could be hired and deployed at the point of use. Apparently no rules of noise or other pollution apply to  these "portable polluters". If you look around you could see them chugging away from morning till evening, and sometimes through the night, making money for the owners...and all powered by the subsidized diesel! Nobody has as yet done a study on these millions of power units that daily consume millions of liters of diesel; but the figures are likely to be equally mind-boggling as are the mobile tower ones.

And what are subsidies? It is nothing but the common man's tax money, and not anybody's dowry!
Think of the heavy CO2, smoke and noise pollution created by all these millions of heavy gensets and how the carbon footprint is going to be made larger as a result. We have rules to harrass the poor 2-wheeler rider on the strength of the various stages of the Bharat pollution laws. But when the railways or the buses and trucks on the roads, or now these millions of diesel gensets, spew out tons and tons of pollution into the atmosphere, our lawmakers conveniently look the other way.

Now to come to the point as regards fuel pricing, if we are to decontrol prices, let us decontrol fully, and we will pay the international prices. Let the government get out of the equation and give up their "cut" of the taxes, except perhaps a small import tax. Let there be the a rationing of the stuff with a minimum quantity offered at a controlled price. (The government have always decried rationing, arguing that it will bring in black-marketing; but it is the job of the government to see that black-marketers are in prison... or, maybe in the ministry, but certainly not out in the streets!)

There has to be a dual pricing for fuel, particularly diesel, so that the core sectors get diesel at a fair price that will hold inflation in check, and the profit-making private players like mobile tower operators and portable power salesmen will have to pay a higher price, and not ride along happily at the cost of the tax payers of this land.

It is high time the "free market" pricing for fuel was abolished and government controls reinstated on a critical input like fuel. That, whatever our pundits will say, is the only way inflation can be checked and development ushered in this country.The government have to see that there is more transparency about the domestic oil production and how it is tied into the system as regards pricing. If the planners and ministers do not claim to understand such simple and straightforward logic, then they could very well quit and take up profitable employment with those companies whose writ they run now. No sir, the people wont pay you good money to do such disservice as you do now to the nation.

The writing is on the wall; if you can read, well and good. Before the entire nation rises in anger in a fiery revolt, it would be in your own interests to put the record straight in a hurry and price aviation fuel, diesel, petrol, cooking gas, kerosene etc in a rational manner --and  NOT according to the whims of your cronies in corporatedom. Such a step might just pour some oil on the troubled waters.

Otherwise it could well be a lot of trouble on exremely oily waters that wouldn't be easy to navigate..... or survive!

The choice, sir, is yours to make !

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