The oil marketing companies (OMCs) began carrying the burden of the increase. They were helped out by oil bonds worth Rs 60,967 crore, a burden that stubbornly remains on the government’s books, limiting its scope to carry out other welfare or stimulus measures.

Given the much-hyped fiscal stimulus, any additions to the fiscal burden are highly avoidable. Thus the desire to free prices is born of the desire to be free of the responsibility to keep petro-products’ prices artificially low should international crude prices go up for whatever reason — geopolitical, supply constraints or the unlikely event of a global demand revival.

Such a desire is understandable if you put yourself in Murli Deora’s shoes back in mid-2008. OMCs were seeing rising losses every day; and were no doubt demanding, daily, that the government let them raise retail prices. Deora’s attempts to do so were opposed tooth and nail by the communist parties whose support the government required on the floor of the house; his pleas to P. Chidambaram for customs duties reductions on crude were squarely turned down. So, naturally, we got rationing. OMCs curtailed supply; diesel-powered private vehicles could get no more than five hundred rupees’ worth of the scarce liquid. OMCs threatened to cut supplies to rural areas. Car-drivers on highways found themselves at the mercy of black-marketers. How did Deora sleep at night?

Regardless of the government’s motive, moving away from an administered petro-product price mechanism that places the burden of subsidies on the Indian fiscal system is to be lauded. The reason being that this burden is shared equally by one and all while its beneficiaries are not the least privileged sections of society by any means.

... contd.