What Will Every Dollar Increase In Gas Price Mean For You?
- Rs 2.5 per kg CNG used for public transport
- Rs 2 per standard cubic metres Piped gas to your kitchen
- 35–40 paise per kilowatt Electricity price
- $20 or Rs 1,200 per tonne Fertiliser price for farmers
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A t a time when prices of vegetables have suddenly gone beyond control, and food inflation has remained a matter of concern for over four years now, the decision of the CCEA to nearly double the natural gas prices will have a spiralling effect on consumer prices. Although finance minister P. Chidambaram has hinted that the supply of natural gas to electricity and fertiliser plants may be subsidised to keep the prices low, raising the natural gas prices and then subsidising its supply will only add to the burgeoning fiscal deficit.
Some estimates have pointed that the decision to raise prices of natural gas will result in a transfer of over Rs 26,000 crore per annum to companies—and on top of it will be the Rs 9,000 crore per annum as subsidy to just the urea manufacturers. Massive subsidy outgo will also be necessitated with the cost of electricity generation jumping from the existing Rs 2.93 to Rs 6.40 per unit.
Now, every one rupee fall against the US dollar raises the oil import bill by Rs 8,000 crore (and we have seen a 12 per cent depreciation in the rupee since April), so the domino impact it has on consumer prices cannot but be visible. For the average consumer, it is a double whammy. Pay a higher price for petrol and diesel and at the same time spend more on food essentials and durables. Diesel price is expected to increase by Rs 1.5 per litre in the days to come. Add to it the price jump expected in LPG/CNG when the CCEA decision comes into force, it is going to pinch the pockets.
Ever since the nutrient-based fertiliser subsidy began in 2010, prices of phosphate and potash fertilisers have galloped. Between March 2010 and June 2012, prices of muriate of potash increased by a whopping 280 per cent while DAP fertiliser rose from Rs 960 to Rs 1,200 per bag. All this adds on significantly to the cost of production but when the procurement prices are raised for farmers I find an orchestrated outcry citing the negative impact it will have on food inflation. Unfortunately, every increase in procurement price is dubbed as a political decision, completely ignoring the economic rationale emanating from the ever-increasing cost of production.
It is now an accepted fact that the nutrient-based subsidy scheme for fertilisers was a failure. Similarly, the Retention Price Scheme under which fertiliser plants operating at 90 per cent capacity got 12 per cent returns post-tax was simply gold-plating exploited by the fertiliser manufacturers to the hilt. Doubling the price of natural gas—and that too based on a questionable methodology—clearly shows that the continuing crisis on the economic front is self-designed to benefit big business. While the blame is easily passed to the international situation, the fact remains that the thrust of the domestic economic policies too has been to ‘privatising the profits and socialising the costs’.
Devinder Sharma is a commentator and activist; E-mail your columnist: hunger55 AT gmail.com
