Friday, June 06, 2008

PM calls for austerity measures

When he became the Prime Minister, Dr. Manmohan Singh was supposed to be a smart economist, and a non-practising politician; now it seems that things are totally reversed. For a long time, the Prime Minister kept off raising the price of fuel even though the international price of oil had gone up tremendously, this was a political decision. At the same time, since the Government has committed vast sums of money to its social welfare schemes, it cannot afford to significantly reduce the duties on oil; hence it refused to accept the Left dictated measure to reduce duty to absorb the price hike.
Now that the Government was finally forced to increase the price of petrol, diesel and LPG, there has been a whole gamut of measures to try and reduce the political cost. So the Prime Minister comes on TV to declare his helplessness at this hike, this being a global increase in fuel. In addition, the Prime Minister and the Congress tried to push some of the cost onto local State Governments by asking the state Governments to reduce duties from their side (and promptly, some state Governments ruled by the Congress did so).
In addition, the Prime Minister called for austerity measures as a way to demonstrate the Government's resolve to control its expenditure. And promptly, the various Ministers announced that they will now not go for foreign junkets, or now travel by economy instead of first class, and so on. This is political posturing at its worst, instead of actual measures to reduce wastage and expenditure. Here are some examples:
1. The newspaper today had an article about the Delhi Government absorbing Rs. 40 of the Rs. 50 hike in LPG. Now, a significant amount of the LPG sold in Delhi is absorbed by commercial enterprises, mostly eateries. They are supposed to buy commercial LPG, but instead buy diverted residential LPG with the connivance of distributors. This is a direct wastage that would be carried out throughout the country; this is also the case where vehicles use residential LPG cylinders.
2. From time immemorial, but announced by Rajiv Gandhi more than 20 years back, most of the money spent for anti-poverty measures gets diverted, with very little money actually reaching the poor. This gets highlighted from time to time, but there has been almost no measure by the Government to reduce this leakage. And the high profile new policies that seek to spend a massive sum are going the same way (such as the National Employment Guarantee Scheme). A lot of this diversion happens at the local politician level, and hence the parties do not attack this corruption.
3. Large construction projects are announced, and then due to bad supervision, these projects get delayed and the costs mount like anything.
4. There is hardly any national critical level project such as a national focus to go in for alternative energy projects to reduce our dependence on oil. Projects to introduce more of ethanol and biofuel (from non food crops) are very slow.
There can be many such examples, but the net effect is that the Government can do a significant amount to both reduce its expenditure as well as decrease India's increase in oil consumption.

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posted by Ashish Agarwal @ 9:43 PM