Fuel Price Imbroglio - 3

Another thing we need to look at is improving the public transport facility. The public transport in all the metros and most of the Class A towns have long since broken down. Once the backbone of the middle class transportation needs, today it has degraded to such an extent that they dread to use it. What we need is major investments in the public transportation infrastructure. Once this is achieved, Public Transportation can be subsidised to induce people to use it as against driving in their own vehicle. Concurrent to this, we can do some major town planning by having designated areas for offices and industries. This shall ease the planners job to have highly efficient transportation from residential areas to the offices. This is not an utopian concept, but needs lot of planning. Town planning is a concept that is not in the lexicon of Indian governments.

One of the reason fuel is highly taxed in India is that the revenue from the taxes goes towards meeting the ever spiralling non-plan expenditure, or in other words this goes towards paying the rent, bloated salaries of government employees and the various ministers. This segment is totally unaccountable and have zero productivity. For decades, government has been giving lip service to reducing non plan expenditure and downsizing the bureaucracy but hardly anything has been done, and will not be done. The common man, who pays the salary indirectly of these government babus, hardly get any service in return from them and frankly, then why should he pay for it. Stop recruitment in government sector for a decade, reallocate the existing staff and make it lean and mean. It is possible. The Indian private sector was overstaffed during the pre reforms era. During 1990's they made a conscious effort to restructure, reorganize and computerize. The results are there for everyone to see. They became fighting fit and ready to take the transnationals head on at the turn of the century. The competency of the Indian private sector didn't happen overnight. It was a well planned strategy that bore considerable fruit. We need to replicate this in the government services.

One of the bizarre policy of the government is that each household will be given only 8 cylinders per year and for extra they have to pay more. It is a basic rule in economics that the same product cannot have dual pricing in an undifferentiated market. This is one thing that is doomed to fail as the implementation depends on unscrupulous LPG distributors, who are veterans in diverting cylinders and hoarding (remember their diverting domestic cylinders for industrial purposes at a higher price creating scarcity in the lower priced domestic sector?)

In the short term, there is very limited options for the government other than raise the price. One thing they can do is to allow rupee to float against the dollar, which will result in rupee appreciating to the band of 36-38. This will reduce the burden of import cost as the oil payments are in US dollars. Why no one is talking about this option is beyond reason?

Another option is to diversify some of the funds that is being underutilized or wrongly utilized albeit with the avowed purpose of helping the poor like, loan waiver for the farmers, NREG (where the leakage is ridiculous with hardly 15% reaching the beneficiaries, free power to farmers and other social sector programs that are white elephants). I am not for a moment saying the poor should be punished. But it is a known fact that they anyway do not get the benefit of any of these schemes as they should. It is the middlemen who are getting fatter. Till we find an effective mechanism to ensure delivery of social sector programs efficiently, let us scrap them. The money saved can be diverted to meet oil imports which indirectly spurs growth.

Last but not the least. Crack the whip on tax collection - Corporate tax, sales tax, income tax, excise duty and customs duty. There is a leakage of more than 60% on tax collection. Even if we can get 1/3rd of this, it will more than make up for the current deficit and then it becomes a habit.

Government taking the stance that there are no options other than rising the prices is an excuse from the controlled economy era. The need of the hour is plugging the leaks, improving efficiency and increasing productivity. All Manmohan Singh and P Chidambaram have to do is ask their Laloo Prasad Yadav how to do it. He did it with Railways (though it was started by his predecessor Nithish Kumar). Better still, handover the Finance Ministry to Laloo! This is not as crazy idea as it sounds. We have had enough of an economist and a financial whizkid (mis)managing our economy. Let someone who is rustic and street smart have his turn. He, at least can't do as much harm.