The politics of oil

Arun Chaubey
(with inputs from Shafey Danish)

While the world was busy confronting rising oil rates, the UPA government allowed prices to spin beyond its control. Inflation is now at a 13-year high. Either the government could not foresee that crude oil prices would spiral to this extent, or it thought that it would be able to tide over the situation riding on the growth plank.

On both counts, it seems to have miscalculated. The Congress-led UPA government now seems to have created a scenario in which it has no other option, but to bank upon civil nuclear deal with the US to save its face before the nation in the name of future energy security.

With one of the ablest teams of economists, it is to credit of the UPA government though that it has genuinely taken steps for its Aam Aadmi, but the question is whether the benefits have really reached the people. The double digit inflation figures have hurt the common man most, and have given black marketers an opportunity to hoard. If we look at Congress’s announcement of debt waiver of over Rs 70,000 crore to win over rural hearts, the measure is meant to serve only short term goal. The agriculture sector requires another revolution, not just reforms. India’s fertilizer subsidy has been increased by 135.5% (Rs 95,000 crore) this fiscal as the government tried to shield farmers from rising international prices. This has taken away any feel good factor that the government’s pro-people policies generated and has given sufficient ammunition to opposition parties under the BJP’s banner to fire constant salvos at the government.

Since the NDA is the principal opposition party it is almost duty bound to oppose the oil price hike; that is what oppositions always do. But in its own time, when crude prices were a fraction of the current prices (ranging from $12.5 to $36.25 against the $137 currently) it quadrupled kerosene prices. Bringing them from Rs 2.52 to Rs 9.01. The UPA in contrast has increased kerosene prices by just 0.8 rupees. The truth of the matter is that NDA’s economic policies while in government were little different from UPA’s. Yet with the election approaching the NDA would not leave the opportunity to corner the govt on oil price hike.

Crude oil appears to have heated up the political scenario in the country, which is on the brink of general elections. Rising oil prices and hence transportation and food costs are giving the ruling party sleepless nights, while the NDA and the BSP are using the issue to put the Congress on the defensive.

The Congress party is trying to deflect attention by highlighting its efforts on reducing the country’s oil dependence with the Indo-US civil nuclear deal. Much to its dismay though, its former Left partners opposed it tooth and nail. The latter has been charging the Congress of not being transparent enough, and is accusing it of surrendering before imperialist America. While nothing could be further from the truth, as the deal is heavily in our favour, the Left have used oil & food prices along with N-deal as effective tools to wedge out of its tie-up before national elections. Something it anyways would have wanted done, as it battles Congress in West Bengal, Kerala and Tripura.

For more than four years, the Congress enjoyed the Left support, but it has political compulsions to go ahead with the deal especially as by not doing so it would lose face on the international stage. The party was also aware that parting of ways would have been inevitable ahead of elections, and the N-deal turned out to be the dichotomic issue.

The ruling party is also not in a position to be dictated by the Left, as it has successively lost in about 12 state assembly elections since it came to power. It has now readied itself to face the consequences, when the Left appears weak on its home turf after panchayat and civic polls in the wake of Nandigram and Singur debacles.

The Left agony over the nuclear deal appears to have precipitated the emerging political scenario in West Bengal, where Muslim electorates comprise close to 30%, therefore it has to bash the imperialist America, which attacked Iraq, Afghanistan and facilitated voting against Iran in the United Nations. Irony of the secular politics is that its demands the appeasement of Muslims. The abhorrent treatment of Taslima Nasreen in West Bengal is a case in point.

However, the decision to withdraw support to the UPA government has created a dilemma for the Left, which would stand along with the BJP as if its votes against the government’s confidence motion in Parliament.

The Left would try to make the withdrawal of support more than just a about the nuke deal. It would bring in inflation and the oil price hike which it has vociferously opposed. Why does the government not do away with the taxes, which account for as much as half of the oil prices? It asks. The government says it needs the money for its social programmes, military expenditure, day to day running of the government, and so on. Why should those who use petrol, generally middle class and above, be spared at the expense of poorer people?

But the Left has been unbending in its opposition. One reason could be that it has to feed the bloated PDS system, which it uses as a tool to promote its loyal cadres and to put up a semblance of socialism. It needs cheap oil to do this.


Congress, SP alliance

The Samajwadi Party chief Mulayam Singh Yadav on whom the Left had so far hinged its hope for the Third Alliance and shielded him against the ire of the Congress president Sonia Gandhi, has taken a U-turn. The Yadav satrap from UP and his general secretary Amar Singh have suddenly learnt the lesson of ‘national interest’ through former President APJ Abdul Kalam and decided to support Congress and vote in favour of nuke deal. They could not have got a better candidate to press home the point on energy security. Kalam is a former President, who is widely loved and respected; he is a former missile scientist and a Muslim at that.

The SP too has its compulsions, therefore it sought refuge in former ‘Muslim’ President Kalam, as its bete noire BSP in UP had already stated that the nuke deal is against the interests of Muslims. Sensing opportunity a few Muslim leaders, who till yesterday were seen with Samajwadi camp are negotiating with Mayawati, whose party has the maximum number of Muslim MLA (29) in the state.

The SP’s support is anything but non political. It is demanding the that the government ban the export of all petroleum products, as they have banned all cement and related products to curb inflation. The move, claims the SP, is pro poor as it would help in bring down prices.

One cannot but notice the congruence of interests of the ‘Aam Aadmi’ as represented by the SP and those of the Anil Ambani led ADAG, which has been involved in a bitter battle with the Mukesh led RIL, and would be harmed if the ban is imposed.

Centre and States

The battle at the Centre soon spilled over to the states. Left ruled West Bengal, while preparing to bear the government over the price hike, announced a tax cut that very day. Congress ruled Delhi announced a LPG cut the next day. Soon after the rest of the states, barring a few, followed suit.

The message was clear: no party could afford to look unsympathetic to the common man when elections were right round the corner. But soon after the states were disgorging the bullet they had bitten; they asked the Centre to share in the losses incurred by the tax cut. VAT panel Chairman Asim Dasgupta wanted the Centre to bear as much as 50% of the losses borne by the states.

But the Centre itself taking a hit of around Rs 22,000 crore because of cut in excise and custom duty, has not obliged. Whether these cuts would stay or would eventually be passed on to the consumers would only be clear once the elections are over and parties no longer feel constrained in taking hard decisions.

Need for Alternative politics?

Oil prices have also robbed the UPA government, despite having an average 9 per cent growth for three consecutive years, of the dividends due to the spiralling inflation. Finance Minister P Chidambaram too showed his helplessness by saying “There is no sign of oil prices abating. There is no light at the end of the tunnel yet because crude oil prices are still rising and today they have crossed USD 140 per barrel.”

The government has tried and tested methods like monetary curbs, export embargos on essential items like cement, and the suspension of futures trading in staple food items such as rice and wheat, but there seems to be no immediate solution before it to come out of the web of inflation.

However, all is not lost as there is still a hope if the government goes ahead with alternative sources of oil. On India’s coal bed methane (CBM) extraction, the Global Environment Facility of the UNDP states, “It is estimated that in India, the largest coal producer in the world, there are around 20,000 sq km of area where CBM capture could be carried out and that the country’s recoverable reserves of methane are 800 billion cubic meters a day over 20 years.”

If we keep aside politics and its compulsions, national parties have to think of alternative energy sources, as the nuke energy would also not suffice for our future needs. Had there been a BJP-led NDA regime in the power, it could not have escaped the international impact of oil crisis either. Therefore, for serving the national interest in long term, political parties need to come together to think of sui generis alternative energy sources to save the country from dependent on outside world.