LPG subsidies - that stench of leaking gas

It's increasingly looking likely that the government's proposal to withdraw LPG subsidies on a section of the population will be enacted soon, as this report states. According to the proposal,

Category 1- If your income is more than 50,000 a month, you will not be eligible for LPG subsidy

Category 2 - If you own a car/scooter/house/pay income tax, you will be eligible to four subsidised cylinders a year after which you' l have to pay the full rate.

The current subsidy comes upto about Rs. 247 (Delhi).

The situation is reminiscent of that instance in Midnight's Children when Ahmed Sinai says "It's like going to the bathroom.You raise your shirt and lower your trousers. Wife, this government is going to the bathroom all over us" Here too, on the one hand, subsidised LPG became costlier by Rs. 50 just a month-and-a-half ago and on the other, plans are on to cancel subsidies altogether. It's called fiscal prudence, I believe but at the end of the day, its basically going to the bathroom.

Now frankly, Category 1- those with monthly income above Rs. 50,000 is not much of a concern. What seriously concerns me are the following issues.

a) When this proposal was first reported, the idea seemed to be to provide six subsidised cylinders to consumers of category 2 (scooter/house/car owners). Now, the number has come down to four. No clue why(at least till now)

b) The methodology - The decision is based on a study by Oil Marketing Companies (IOC, HPCL and BPCL) which says that 6 cylinders would be approximately enough for a family through the year for at least 65-70% of families. Thus, the same companies who have been arguing for cutting subsidies have conducted this study - a bit like say the Congress conducting a study which concludes that Indian youth want Rahul Gandhi as P.M.

But, let's ignore this for a while. While sample size, extent of rural penetration o f study remain unknown, one wonders whether there has been enough representation of larger families? In such a hue country, where cooking patterns and consumption patters differ, isn't this perhaps a tough call to make at a national level? Would't a state-lever or zone-level study have been far better? And in any case, 35% of families is no small number! How do explain away the greater burden on them?

c) Now families which come under Category 2. Owning a scooter or a house would mean that you are way above the BPL families or just-about-APL families. It might also mean that you probably have a house loan, that you are struggling with the excessive fee tuition classes charge your children, that you might have an aged parent whose rising health bills are causing you endless headaches. It might also mean that often, you will choose to not take your vehicle out because petrol prices are soaring too. To such a family the government says - the fiscal deficit is high, so the subsidy will be withdrawn. While the monetary impact may be say Rs 500-750 a year, one cannot imagine a more insensitive move at this point of time.

d) As pointed out here, despite soaring crude prices, international oil supply is stable with global spare oil capacity high. Also, oil producing companies (as opposed to oil marketing ones) seem to be making substantial profits. And to add to fun, the latest bit of news is that in June, despite cuts in excise and customs duty on petroleum products, collections have actually increased from last year.

The argument for the government's step is that it will prevent commercial establishments from buying cylinders meant for domestic use (basically black marketeering)- a practice which is widely apparently widely prevalent and causes much loss, slightly bridge the oil marketing companies' losses and contribute to deficit reduction.

Now, out of sheer curiousity, I wonder what happens when there all these domestic gas cylinders that used to serve commercials establishments disappear and the latter are forced to buy gas at market price? What about the small-time trader whose margins have already been affected by rising vegetable prices? Now, I am sure she will be punished for the gruesome crime of 'stealing' India's precious LPG resources. But what about her education budget? her health budget? And do note, there is no indication that the revenue gained will be used for mega social welfare projects that can come as a relief during a time when malnutrition stalks India; or for a significantly higher outlay in education or health which will benefit Category 2 families in the long run or contribute towards bridging social gaps.

Ok fine, black marketeering is a menace. But is cutting supply the only way out? Isn't there no localised monitoring scheme which can be implemented, say with the help of the States? In answer to this, one realises it's not really about the black market. It's about the oil marketing company. Government pronouncements in recent times have tended to be dismissive or even defiant on the issue of 'saving' these companies from the burden of subsidies. Now, as a catakyst comes in busines journalism. Every report, every analytical piece tells you of how the government is forcing oil marketing companies to sell oil at subsidised rates as though the government is this evil bandit holding a gun to those poor companies' heads forcing them to subsidise their produce when their prime aim should be simply to make profits.

This brings us to the core question. Why do government-run organisations, which are clearly in the business of supplying Indian citizens with essentials, seem to be so massively preoccupied with the idea of profit and loss. I am not suggesting that they be shoddily managed or let loose or talking about some utopian welfare cooperative. Of course, operation costs are paramount, confidence and credit-worthiness are all key. But one wonders if recent policy is more akin to conserving the bath water while throwing the baby out. What exactly is the relevance of a smoothly-run profit-making firm when large parts of the population are being evicted from its scope?

The answer to this of course lies in the same economic theories which have seen the large-scale withdrawal of the state from public spheres. And, also the obscuring of the idea that the institutions that govern us are functions, theoretically at least, of our consent and willingness to repose faith in them. Their sole purpose lies, to use a cliched term, in the greatest good for the greatest number. Occasionally, one looks at the 'mess' around and thinks "Man, this institution deserves better. This should be excellent" - a most noble idea. But in one's hurry to build such islands of excellence, whether they be IITs or 'navarathnas' or expressways, one is again and again confronted with the issue of the the greater community that finally legitimises the institution. Mostly, those in such positions dismiss the issue, talk darkly of merit and subsidies and efficiency. In this situation, it is imperative that this message be chanted, written down, plastered on walls, made screen savers or whatever - 'excellence/efficiency and the progress of the many based on equitable distribution cannot and should not be mutually exclusive'. If we ignore this simple yet profound message, the outcome will be more explosive than all that LPG one an ever hope to save.

Macaulay's lesson no.. XMXXL??

As part of the world-wide chorus on the incidents and violence in London, let me add my two shillings worth, especially with regards to what I see as its resonance (yes, I' ve thought about that word) in India.

There seem to be a general acceptance of the fact that most of the rioters, while not exactly starving, form what is being called 'the underclass' of British society. Inhabitants of areas plagued by unemployment, these men (in many cases boys and girls) seem to view looting as a psychological vent and a call for recognition too. As a rioter is quoted as saying to a media-person:

"You wouldn't be talking to me now if we didn't riot, would you?"

There is also agreement (from right-wing papers to liberal ones and leftist bloggers) on the issue of the massive inequality in British society being a major factor in these riots. A small section continues to grow wealthier while the middle class suffers and 'underclass' 'disappears' from the radar. Meanwhile, the government continues to cut expenditure in the name of austerity. Over the past one year, especially in December and March, various organised movements have struggled against such policies and the rising inequality. These incidents too, are yet another sign.

At the same time, it is crucial that we distinguish between the earlier movements which were organised and had progressive aims and this round of violence which has now become an excuse to loot and steal. Any possibility of romanticising these incidents, even if they involved youths breaking open the showrooms of major brands, must be resisted.

That said, economic and social inequality happens to be a burning issue in India too. Once again, we see a minuscule class cornering all the benefits of the India's 'growth' and huge sections of the population 'disappearing'. Struggles have already broken out in many parts of India, some with the aim of preserving our democratic structure, some with the aim of destroying it. To those who seek the former, what Britain teaches us at this moment is the dire need for building solidarity (yes, that much abused word) between classes to resist the dominance of this small group of people. To be honest, it doesn't seem like there is much time.

As an aside, this article eloquently points to how consumerism so forms part of parcel of these riots; something that is fascinating and tragic at the same time. We've seen this before, in Gujarat in 2002 especially - how amidst chaos and violence, humans still seem to have an unerring eye for the best brands. Call it the ultimate victory of marketing or what you choose but it brings me to the second point, the failure of any major political stream in India, including (unfortunately) the left, to combat the culture of consumerism. Of course, we are all guilty and of course, it's no easy task but some sort of moral politics which confronts consumerism is sorely, sorely needed.

Here' s an awesome collection of articles on the issue from the amazing zunguzungu.

Some more reading from Al-Jazeera, here and here. Here's quite a different take on the issue

Ps. Apparently, the Prime Minister of Britain, The Chancellor of Exchequer and the Mayor of London were on holiday abroad. One thing to be said for Dr. Manmohan Singh is that he doesn't take many vacations. But then again, he doesn't do much else either