Mr. Riko Mahato(rkmht)

Sunday, April 16, 2017

Adjusting fuel prices daily at petrol stations is a long overdue reform

Hiking fuel prices at petrol pumps is such a politically fraught exercise that there is even a hesitation to decrease prices so as to safeguard against a possible spike in global petroleum rates in the future. It is worth watching, therefore, how the proposed pilot project by the three public sector oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — proceeds as an effort to reform the pricing mechanism. Starting next month, in select citiesfuel prices at the pump point will be reset daily in tandem with global oil price movements. Till the project’s outcomes are assessed, the rest of the country will continue with the existing system, under which petrol and diesel prices are calibrated generally on a fortnightly basis. If one considers the latest price change effected by oil companies (a ₹3.77 reduction per litre in the price of petrolaccompanied by a ₹2.91 cut for diesel on March 31), the case for a daily price reset makes eminent sense. Apart from the fact that it is illogical for an economy integrated with the global financial and commodity markets to keep fuel pricesunchanged for as much as a fortnight, aligning prices daily and spreading out the degree of change will lessen the impact on consumers, on both the upside and the downside. Marginal changes in the daily price of fuel will not make or break consumer confidence or fuel inflationary expectations, at least because of oil costs, as it currently does.

A more gradual ascent or descent in fuel prices, rather than abrupt shifts over randomly selected intervals, makes good sense, given how closely our fiscal outlook is tied to oil price movements. The United Progressive Alliance government had freed the regulation of petrol prices in late 2010, and the National Democratic Alliance government followed through by liberating dieselprices within six months of assuming office in 2014. Such dismantling was necessary as previous attempts at abandoning the administered price mechanism for India’s largely import-dependent consumption of petroleum products never really took off, even as subsidies distorted the system further. The fortnightly system of price resets for both fuels has been followed over the last three years. The latest price cuts came after more than two months of no change, overlapping with the Assembly elections in five States. A transparently formulated and dynamic pricing regime would hopefully prevent such distortionary coincidences in the future. It would also allow private companies to compete with the PSU oil marketers, which today control 95% of fuel outlets. The government, on its part, must start winding down the extremely high petroleum product taxes imposed since June 2014, when oil prices began to fall, along with its energy subsidy liabilities.

De-escalation, not deal-making, is needed to reduce tensions in the Korean peninsula

With tensions in the Korean peninsula continuing to escalate, Beijing took the rather extreme step on Friday of warning that something needs to be done to wind down the U.S.-North Korea confrontation, saying the “the storm is about to break”. The heightened rhetoric of recent days follows Washington’s display of naval power with the despatch of a U.S. aircraft carrier strike group to the waters off the Korean coast. Though U.S. officials described the move as merely cautionary, President Donald Trump, who has made North Korea a key foreign policy concern of his administration, used the word “armada” somewhat ominously. For their part, the North Koreans have threatened nuclear retaliation in the event of any attack. In late March, the U.S. had commenced installation of the so-called Terminal High Altitude Area Defence (THAAD) anti-missile system in South Korea in response to missile tests by the North. The agreement, in the works since last year, has already increased regional tensions, entangling China as well. Washington and Seoul have emphasised that intercepting the North’s advanced development of inter-continental ballistic missiles was the real objective behind the new system. But apprehensive that its own nuclear infrastructure would be inevitably exposed to snooping by the THAAD radar, Beijing has sought to counter Seoul with trade and tourism boycotts.

Mr. Trump’s threat of unilateral action against Pyongyang in the event that China fails to rein in North Korea may partly echo the mood in Washington after the recent missile strikes in Syria. If the Chinese government views Pyongyang’s growing nuclear capability with concern, as it professes to, then it must do much to use its leverage effectively. Merely stressing the need for a peaceful resolution to the conflict is not enough. Japan, Washington’s important regional ally, would view with no less consternation any potential threat to stability in its neighbourhood. American air strikes in Syria last week have raised very valid concerns about their legitimacy under international law. But they also indicate that the Trump administration may be shifting politically from a populist-driven isolationism to more conventional interventionism. His latest observations on China point to a shift from open confrontation to a possible constructive engagement. Notable here, for instance, is a willingness to eschew the previous rhetoric on China as a currency manipulator. Against this emerging backdrop, a return to a reasoned and nuanced approach on North Korea would be a most positive development in these volatile times. That would, however, require a spectacular roll-back by Pyongyang of its current nuclear capability, which includes long-range missiles that can reach targets in the Pacific. As well as sustained cooperation between China and the U.S., it is time for cooler minds to weigh in — there is nothing to be gained by aggressively staring down adversaries.

The BJP did well in the by-elections, but the Congress managed to arrest its slide in Karnataka

By-elections are no more than pointers to the popular mood. They are not firm trend-setters for a general election. When the winners of polls in 10 Assembly constituencies in eight territories are representatives of four different parties, there is no one big lesson to be drawn from the results. Even so, these will inevitably be interpreted as indicators of the public mood, especially when four of the States, which held by-elections, are due for Assembly elections by the end of 2018. The Bharatiya Janata Party, which is sitting pretty after sweeping the elections in Uttar Pradesh and Uttarakhand earlier this year, did well to best the Aam Aadmi Party in Delhi, and win a seat each in Rajasthan, Himachal Pradesh, Madhya Pradesh and Assam. The victory in Delhi should be especially satisfying for the BJP as AAP leader, and Chief Minister, Arvind Kejriwal attempted to cast himself in a larger-than-life image, pitting himself directly against Prime Minister Narendra Modi in his campaigns and public statements. That the AAP candidate lost his deposit is a shocker: the party had won 67 of Delhi’s 70 seats in the 2015 Assembly election. As the AAP seeks to extend its reach and increase its clout, it seems to be losing out on its home turf. More than the victory in Assam, or even in Rajasthan and Himachal Pradesh, what will be more gratifying for the BJP is the second place finish in West Bengal. Its candidate was ahead of both the Left Front and Congress candidates in Kanthi Dakshin in West Bengal, an indication that the party could grow in opposition to the ruling Trinamool Congress in the years ahead. That must be truly worrying for the Communist Party of India (Marxist), which had held power in the State for a record 34 consecutive years until 2011. As the 2014 Lok Sabha election showed, the BJP is no longer a party of the Hindi belt alone, and is now national in character.

If the BJP has cause to celebrate its position at the top of the heap, the Congress can draw some comfort in having arrested its slide in Karnataka. The party won both seats in the State, beating back the challenge from the BJP, which was on the comeback trail after the return of former Chief Minister B.S. Yeddyurappa to its fold. Chief Minister Siddaramaiah, who was under pressure from sections within his own party, should get some additional breathing space till the Assembly election next year. By retaining one seat in Madhya Pradesh, the Congress has shown it cannot be written off despite having lost three successive elections to the BJP. Indeed, if there is one lesson for all parties in this round of by-elections, it is that there is still everything to fight for in the Assembly elections, whether they are to be held next year or later.