Nothing is more reflective of the confusion and mix-up of priorities of the United Progressive Alliance government than the mismanagement of fuel pricing. While struggling to control inflation through monetary policy, the government sees no problem in allowing oil marketing companies to continually raise the price of petrol. The latest hike, by more than Rs.3 a litre, comes on top of the two substantial increases earlier this year. Although diesel price is still regulated, and remains unchanged for now, the repeated increases in the price of petrol have placed an enormous burden on the lower and middle income classes. The rationale for keeping the controls on diesel price is that any increase could affect agriculturists, freight carriers and public transport vehicles — but the unintended, and undeserved, beneficiaries of such a policy have been owners of high-end diesel cars and SUVs. On the other hand, owners of two-wheelers and small cars have borne the brunt of the escalating price of petrol. True, dual pricing for diesel is difficult to implement, but as suggested by the Centre for Science and Environment, other measures could be worked out to prevent misuse of the fuel by rich car-owners. What is clear is that the widening price gap between petrol and diesel has contributed to the rise in sales of diesel vehicles. According to CSE, diesel cars constitute 36 per cent of new car sales in India, and have disproportionately contributed to air pollution.
While grappling with the hardships of high inflation, most evident in the sharp rises in the prices of essential commodities, India's middle classes cannot afford the ballooning of their household budgets on account of recurrent petrol price increases. Nor are the poor spared the indirect effects. Waiting in the wings is a proposal to limit the number of LPG cylinders supplied to households paying income tax to between four and six a year. Although a meeting of the Empowered Group of Ministers that was to decide this issue on Friday was deferred following open opposition from the Trinamool Congress and the Dravida Munnetra Kazhagam, indications are that the relief might be temporary. Political expediency, and not social commitment, seems to have stayed the hand of the government on this sensitive issue. Targeting subsidies is the name of the game, with the UPA government conveniently ignoring the fact that with social targeting, errors of exclusion are invariably high and the poorer and weaker sections often fall through the safety net. India still needs price controls on petroleum products if hundreds of millions of its vulnerable people are not to be exposed to sudden shocks.