Over the past decade or so, the government has set up many committees to advise on the steps that need to be taken to place the oil companies on a firm financial footing. Four of these committees are notable because of the eminence of their chairman and the quality of their reports. The ‘R’ group committee headed by Dr Vijay Kelkar, currently the chairman of the Finance Commission but formerly the petroleum secretary; Arjun Sengupta, former ambassador to the European Union and member of the Planning Commission; Dr C. Rangarajan, former governor of the Reserve Bank and until recently the chairman of PM’s Economic Advisory Council and Mr. B.K.Chaturvedi, currently member of the Planning Commission but earlier the cabinet secretary and also petroleum secretary. Each of these chairmen had the support of individuals of proven professional and administrative capability. Each of their reports were marked by solid economic logic, analytic rigour and dispassionate clarity. All of their efforts have essentially come to naught. (The Chaturvedi Committee report has yet to find its place on the shelf. It has only recently been submitted and it is still officially under ministerial review. But judging from the widely reported remarks of officials the decision to side step its recommendation has already been made).

There is a simple reason why the government consistently ignores the findings of such high-profile committees. They all come up with a singularly unpalatable recommendation. The price of petroleum products must eventually align with international prices; the subsidies on LPG and kerosene must be reduced and the levels of protection accorded the domestic industry should be cut back. The Chaturvedi committee has for instance advised that the government adjust prices so that within 24 months for diesel and by March 2009 for petrol both products are aligned to international levels. A recommendation to hike fuel prices would be difficult for governments to accept at any time let alone during the run up to a general election.

The question should be asked — why does the government persist in appointing committees comprised of professionals to address what is essentially a political subject? Surely they must know that no individual worth his professional salt can help the government skirt the political conundrum of volatile petroleum prices. Why does the government not now contemplate kicking the ball into the court of the politicians? After all if there is to be progress it can only be if the politicians resolve somehow the political dilemmas of oil. My suggestion is that the next committee on petroleum should comprise of politicians and should be asked to come up with bold and practical suggestions on ‘how’ to implement what everyone knows must be done.

Petroleum sits at the nub of every politician’s deepest dilemmas — the dilemma of equity versus efficiency. The poor cannot afford high prices and equity dictates that key commodities like kerosene and LPG should be provided to them at subsidised rates. But subsidies encourage smuggling, the black market and product adulteration. It is a major reason for financial and operational inefficiency. The dilemma of good economics versus tactical politics: the ‘under recoveries’ of the oil companies will deepen the fiscal deficit. The consequential pressure on interest rates will (sooner than later) slow industrial growth and the economy. But what is the alternative? A hike in the retail price of transportation fuels; the containment of subsidies to LPG and kerosene. The consequence could be a sharp electoral rebuff. The dilemma of control versus competition: petroleum is a sector of strategic significance. It cannot be left to the vagaries of the market. Government must have overarching control. But it cannot be denied that state controlled ‘dirigism’ has been the bane of the public sector; that competition is a major driver of technical innovation and breakthrough performance and that our petroleum companies will not achieve world-class standards if shackled to bureaucratic control.

These are political dilemmas that can only be resolved by politicians. These are also dilemmas that lend themselves to empirical study.

The conventional political wisdom is that a hike in the price of petroleum products will inevitably undermine electoral support. I have no doubt that a standalone question to a voter ‘will you support a hike in the price of fuel’ would indeed evoke a strongly negative reaction. But I wonder whether the reaction would be comparably negative if the question were ‘would you support small and phased price hikes in return for guaranteed product quality?’ Or to the question ‘would you vote for the person who ‘promised’ subsidised kerosene but was unable to deliver or the person who raised prices but gave secure supplies?’

Politicians have a kneejerk negative reaction to any suggestion that involves a price hike. However against the backdrop of product shortages, black marketeering and quality adulteration (not to speak of corruption and inefficiency) — all the consequences of our distorted pricing and taxation structure — I wonder whether the fears of politicians are not simply a reflection of their preconceptions and expectations than of voter reality. It would certainly do no harm for politicians to draw on the widely available tools of scientific market research to better understand the true dimensions of the politics of oil.

The hard truth cannot be swept aside. We are inextricably connected to the international oil market, and cannot escape the implications of volatile prices. Committees can serve a useful purpose in drawing up the consequential route map. But only if there is the political resolve to consider its recommendations seriously — one that has been missing so far. So perhaps now, it’s the politicians’ turn.

The writer is chairman, Shell Group in India. Views expressed are personal.