Populism Rules

Sep 26 2013, 04:35 IST
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SummaryInvestors won’t take govt seriously if Moily rules out a big diesel price hike, or even wants a partial roll back

Given how the finance minister keeps talking of the fiscal red line and is trying to convince investors India means business, it’s difficult to reconcile actions like the food security bill or the one on land acquisition. Perhaps the government hopes investors will believe it can be populist while being pro-investor at the same time. Even that slim hope has taken a big beating with petroleum minister Moily ruling out a big hike in diesel prices, never mind that under-recoveries are up from R9 a litre when price hikes began in January to R14.5 now, taking annual diesel under-recoveries to around R60,000 crore and that on all oil products to around R1,50,000 crore.

Much worse, while prices of diesel sold to bulk users like bus transporters were hiked to market levels in January, and the Supreme Court refused to allow the interim stay granted by various state high courts, Moily is now talking of selling fuel to government bus transporters at a subsidised rate. You can, by the way, do that while keeping within the fiscal red line—just tell the bleeding ONGC and other oil PSUs to bleed a little more. Hopefully investors will buy the logic.

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