Here’s how swamped in politics our economics is. From an article in the Indian Express, about reforms in the Petroleum sector, after the murder of Manjunathan Shanmugam:
The Cabinet note is also expected to recommend raising the price of household LPG (LPG = Liquified Petroleum Gas) by Rs 50 per cylinder from January 2006. And by another Rs 50 after six months, if there was no political opposition to the first increase.
1.) “If there was no political opposition”?! If it makes sound economic sense, there should be no political opposition in the first place! As Ila Patnaik pointed out in her article a couple of days ago, the subsidy on LPG is absurd, because no family “below the poverty line” (whom subsidies are supposed to benefit) can afford even the subsidized LPG! The price for a cylinder of LPG hovers around Rs. 300 per cylinder. If a family can afford that on a monthly-bimonthly basis, then it is definitely not below the poverty line. Plain and simple – any political opposition to this will be for the sake of populism, and should be crushed.
2.) From a broader standpoint, why should we need a “Cabinet note” recommending a price hike/cut? That is the fundamental problem with our Petroleum infrastructure. Once we have corporatized our Petroleum sector, we ought to leave decisions regarding imports, pricing, distribution, acquisition, diversification, and so on, to their managements. All that the Ministry of Petroleum ought to be doing is setting clear policy guidelines and making sure that they are adhered to. If the Petroleum minister is going to micro-manage the running of ONCG, OIL, IOC, HPCL, BPCL and GAIL, we might as well merge all of these corporations as Departments under the Ministry of Petroleum, and stop this sham of calling these organisations as “companies”.