Fuel Price – Misleading Ad – Dripping Economy

29 June, 2010 at 23:19 Leave a comment

Has this ever happened to you? See something out of ordinary and instantaneously get that feeling that there is something wrong with the picture at a gut level? You cannot quite put a finger to it but every fibre in your body says that this is not quite right and has to be analyzed deeper, time permitting? Well, that is exactly how my shell reacted when I saw this advertisement from the Ministry of Petroleum and Natural Gas in the Deccan Chronicle newspaper on 27th June 2010 –

Apparently, one Hashim Adil of Hyderabad shares my concern. In a letter today, he says that the advertisement justifying the hike in prices of LPG cylinder (this is wrong for it is liberalization which has inevitable led to a price hike) is ridiculous. It compares the prices of the commodity in neighbouring countries to make us believe that we are paying less. However, 577 Pakistan Rupees is equal to Rs 311 in India, 537 Bangladeshi Taka equals Rs 355 in India and 822 Sri Lankan Rupees equals Rs 333 in India. LPG costs more in India than in Pakistan and Sri Lanka.

    There are a number of issues here. First and foremost is very publication of an advertisement by ministry to justify a decision it took without any regard to previous commissions and opposition. Second, the accuracy of the advertisement has been called into question and there is no one exploring. Where is the so-called hawkish factual rigour in reporting that people are giving and getting awards for? (which seems to be all the time). Is anyone looking deeper if the prices published are normalized to cylinder volumes and currency? I certainly do not hear any newsbytes. Third, comparing prices of other washed-out hopeless countries that surround this pathetic excuse of a nation is just giving excuses and betting on sadistic catharsis in the misfortune of others. So, some poor sod in Bangladesh is paying more for LPG and Kerosene. This proves what exactly? Why some stupid government in some idiot country charges what for some commodity is a matter of some policy and some arrangements they have with some oil producing nations and some oil company. What does that have to do with prices in India? But wait dear reader, the main analysis of my gut feeling and discomfiture is that the whole premise of the advertisement is wrong because it was designed to mislead people into thinking that the government is still doing a better job than the governments of genocidial poverty-ridden violent terrorist failed states. Is this the company we want to compare ourselves with? Why is the comparision not made to fuel prices of the USA where petrol costs half than what we pay at the bunk? The use of media and the English language is just an icing on the cake to prove that we live in a very controlled and suggestive society. The only people who can read and understand this silly advertisement in the first place are the urban middle-class who have some swing and make noises. By satisfying this no-good rubric, the ministry has a free pass.

    I hope am not being Chomskyish here and shouting some conspiracy because Jayati Ghosh in her editorial today titled, Dripping Economy gives many points to ponder about the very timing and necessity of “freeing” the price of petroleum products in the midst of almost unprecedented food and generalised inflation. I could not believe that Capsicum is 90/- a kilo…

    oil is a universal intermediate (which enters directly or indirectly into all other prices) this necessarily means a further rise in inflation. This is a move that is inexplicable from the point of view of general economic policy. Global prices of petroleum products in the past three years have been marked by the most extreme volatility, more than doubling and then falling to nearly half within a period of 18 months. The fluctuations hardly reflect “economic fundamentals” which have not changed much in the past few years; rather they show the impact of global speculative forces on fuel prices

    UPA government has been trying for some time to decontrol oil prices, despite the global volatility in these prices and the lack of convincing arguments in favour of such deregulation. The Rangarajan Committee on the pricing and taxation of petroleum products was set up in the hope that it would recommend such a move. But that report did not really point to this conclusion, so the government, not to be thwarted in its desire, set up yet another committee. This time it was an Expert Group chaired by former Planning Commission member Kirit Parikh, with the more or less explicit mandate to recommend wholesale liberalisation of the pricing of petroleum products. The Expert Group duly did just that, and the government has been quick to accept its recommendations

    official reason for this move is that it is necessary to stem the “losses” being suffered by the oil marketing companies. But this argument misses the point that all of these companies deliver a range of products and services, the prices of all of which are not controlled. In fact, profits after taxes of the most important oil companies have remained positive and often quite substantially so in the past 10 years. The oil refineries and governement also get a huge pay-off from taxes and levies but they are not willing to budge. Current strategy is one that puts the entire burden of irrational shifts in the international prices of oil on the consumer, even if the burden sharing involved is extremely regressive and unjustified

    So, there you have it. The most obvious reason for the deregulation or price hike or whatever you want to call this scum scam, seems to be that the government has chosen to favour the private companies that have been allowed to enter and expand in this sector. This has encouraged the government to take a measure that will cause great harm to most of the population so as to bring in more profits to a few large and powerful companies and of course itself. It also gives people a chance like Andhra Pradesh CM to be a hero by giving statements that the state will buffer the poor from the price increase. This brings to mind popular adage: “Either the government owns the oil companies, or the oil companies own the government.”

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    Entry filed under: Business, Citizen-Journalism, Economy, Energy, India, Life-Theories, News-Media, Politics, Poverty, WebXP.

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