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.

... contd.