Backlash After India Hikes Fuel Prices

By webadmin on 12:02 pm Sep 14, 2012
Category Archive

Ammu Kannampilly

New Delhi. India’s government faced a growing backlash on Friday after hiking
diesel 12 percent in a desperate bid to reverse its economic woes, as
opponents said the move would stoke broader price rises.

Widely
accused of policy paralysis, Prime Minister Manmohan Singh approved the
rise at a cabinet meeting late Thursday despite protests from coalition
allies and even an acknowledgment by his own Congress party that it
would cause pain.

However newspapers said the move had become
inevitable as state-run refiners had been incurring massive losses as a
result of government price controls.

India buys in around 80
percent of its oil needs and the import bill has risen dramatically
because of high global prices and a plunging rupee.

The move,
which came into effect at midnight, means a liter of diesel will now
cost an extra five rupees. The price of a liter in New Delhi had stood
at 41.32 rupees (74 US cents) a liter.

The price of kerosene, used
extensively by the poor, was left unchanged, as was the cost of
liquefied petroleum gas (LPG) cylinders, also used for cooking, but oil
ministry officials said cooking gas bottles would now be rationed.

The Trinamool Congress, a key ally of Singh’s multi-party administration, was the first to denounce the increase. “We
will not accept it and demand its rollback,” said party president
Mamata Banerjee, who is also chief minister of West Bengal state.

India’s main opposition Bharatiya Janata Party (BJP) also hit out at the rise. “The
diesel hike will have a cascading effect and prices of all essential
things will go up,” said Narendra Modi, chief minister of Gujarat and a
senior BJP figure.

The general secretary of the main governing
Congress party, Digvijay Singh, also voiced fears that the rise could
“hurt the farmers and common man.”

“At the same time, there are
some unpleasant decisions that have to be taken by the government by
taking an overall view of what is best for the country,” he added.

The
Congress-led government, which is scheduled to face general elections
in 2014, deregulated petrol prices in 2010 in a reform aimed at reducing
the subsidies it pays to state-run fuel refiners.

The high cost
of imported fuel is partly blamed for the ballooning of India’s
current-account deficit to its widest level in eight years. India’s
once-booming economy grew just 5.5 percent between April and June —
its slowest expansion in three years. Inflation is running at nearly
seven percent.

The Times of India said the move would drive up food prices at a time when people are already struggling to make ends meet.

“The
massive hike of five rupees in the price of diesel and the removal of
subsidy on cooking gas beyond six cylinders will hit the common man,
already caught in a price spiral, very hard,” said the paper.

The Mail Today said in a front page headline that the move had sent family budgets “into tailspin.”

“The
move, aimed at cutting the losses of oil companies and reducing the
subsidy burden on the government, has wreaked havoc on the monthly
budget of ordinary households,” the paper wrote. “It means more
pain for the common man…. But from an economic standpoint the decision
was imperative as oil marketing companies were bleeding profusely.”

A
series of economic reforms have stalled in recent months owing to an
impasse in parliament sparked by a scandal over the the awarding of coal
mining concessions that has been dubbed “Coalgate.”

“The
government’s economic managers, battling to reverse a severe slowdown
that has hit jobs and income growth, have chosen to suffer short-term
price pains for the sake of medium-term growth prospects,” said the
Hindustan Times.

Petrol prices were untouched after they were
slashed three months ago to mitigate a sharp increase in May that
sparked public protests and anger among the government’s coalition
allies.

Agence France-Presse