People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 27

July 04, 2010



Defeat This Economic Authoritarianism

IT is, indeed, an ominous sign.  On the 35th anniversary of the imposition of internal emergency, by the Congress government led by Ms Indira Gandhi, the Congress-led UPA government headed by prime minister Manmohan Singh has announced a steep hike in the prices of petroleum products.  The imposition of internal emergency on June 25, 1975 was political authoritarianism which was resisted by the Indian people and defeated in 1977.  Likewise, this economic authoritarianism must be resisted and defeated.  Public pressure must be mounted through popular protest actions to force the government to roll back this merciless attack on the livelihood of the vast majority of our people.  The nationwide hartal on July 5 must be made a resounding success. 

The government has increased the price of petrol by Rs 3.50 a litre, diesel by Rs 2, kerosene by Rs 3 and a cylinder of cooking gas by Rs 35.  Worse, the   government has announced that it shall proceed to fully deregulate the prices of all petroleum products indicating that future hikes are imminent. 

This cruel attack comes on top of the relentless rise in the prices of all essential commodities, which currently is around 17 per cent. A few months ago, these prices were rising at a rate of over 20 per cent.  This hike in the prices of petroleum products is bound to increase the overall inflation rate further as transportation cost across the board will rise steeply.  The overall rate of inflation in the economy is already more than double of what the Reserve Bank of India had anticipated at 5.5 per cent for this time of the year.

The government has embarked on a media blitz and a disinformation campaign justifying this price hike.  An accompanying article in this issue thoroughly exposes the government’s false claims and subterfuge in justifying this hike. 

The government claims that it is heavily subsidizing petro products in the interests of the people.  Even after this increase, which imposes an additional burden of at least Rs 22,000 crores on the people, the government claims that close to Rs 37,000 crores would be its subsidy on kerosene and cooking gas. This is based on what is called the “under recovery” of the oil companies.  This is an over clever way of justifying the hike.  Under recoveries are not losses.  They represent the revenue to the oil companies if the domestic prices are calculated on par with international prices.  As the article carried elsewhere in this issue exposes, all the oil companies are reporting massive levels of profit and, hence, to argue that they are making losses is, simply, dishonest. 

While the government talks of subsidies on petroleum products, it seeks to conceal the fact that taxes on petroleum products constitute the biggest chunk of revenue for the government.  In 2010-11, the contribution of these taxes is expected to be to the tune of a whopping Rs 1,20,000 crores or nearly four times the claimed subsidy.  This is a clear case of reverse subsidy with people providing revenue to the government substantially more than the so-called subsidy provided by the government. 

India needs to import crude oil since our domestic production is not sufficient to sustain our economy.  These imports, hence, constitute a lifeline for our economy.  This is akin to importing foodgrains under conditions of famine to feed our people. Surely, the government cannot tax such foodgrains imports which are essential for the life of our people.  Likewise, oil imports are required to feed our economy.  Surely, the government cannot impose massive taxes and duties on such imports.  Worse, having imposed such high taxes, the government now turns to claim that it is subsidising petro products. 

In an attempt to justify such a hike, the prime minister, while attending the G-20 Summit in Canada, has said: “The adjustment (sic) that has  been made in the prices of kerosene and LPG was also necessary considering the very high subsidy that is implicit in their pricing structure.” In the interest of the aam aadmi, the prime minister should have made an `adjustment’ in the tax structure rather than hike prices that will devastate the vast majority of our people. 

Further, the petroleum minister is going a step further and trying to take refuge by stating that, it was the United Front government, supported by the Left parties in 1996 which first proposed the deregulation of the prices of petroleum products.  What he deliberately conceals is the fact that such a proposal for deregulation was accompanied, under pressure from Left parties, by a simultaneous withdrawal of all taxes on imported oil.  This UPA-2 government wants to continue with these high taxes  while imposing disastrous burdens on the people through price hikes. 

Herein lies the real reason for this price hike.  Globally, as we had seen in these columns in the past, capitalism’s effort to emerge from the economic crisis caused by corporate insolvencies has led, in many countries, especially in Europe, to sovereign insolvencies.   The only way that this round of capitalism’s crisis is sought to be overcome is by drastically reducing government expenditures, which means attacking the livelihood of the vast mass of the people.  At the G-20 Summit, Germany and Britain have announced the cutting back of government deficits  sharply and swiftly. In order to manage their rising levels of indebtedness, many advanced countries are drastically cutting back on social sector expenditures at the expense of people’s livelihood. 

In India’s case, this hike is to serve precisely this purpose of  reducing government’s deficits by imposing greater burdens on the people.  This year’s budget has earmarked a mere Rs 3,000 crores as subsidy on petroleum products as opposed to the claim of Rs 37,000 crore subsidy on kerosene and cooking gas alone.  Clearly, during the course of this year, the prices of petroleum products are bound to rise further easing the government’s  fiscal deficit which stands now at 5.5 per cent of our GDP. 

Further, the total de-regulation of prices of petro products will ensure their entry into commodity exchanges and make them subjects of speculative trading. This, as we have seen with other essential commodities, will further contribute to the increase in prices through speculation.

Clearly, therefore, this hike in the prices of petro products  is a part of capitalism’s  recipe to emerge from a crisis of its own making by imposing greater burdens on the people. Having assumed office, in the name of the aam aadmi, this UPA-2 government  is resorting to devastate the livelihood of the vast majority of our people.  This is simply unacceptable.  The forthcoming nationwide hartal on July 5 must send a strong message to the government  - if  it does not roll back these hikes, then popular protests will be further mounted till the objective is achieved. 
(June 30, 2010)