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UPA gears up for decontrol of fuel prices

UPA gears up for decontrol of fuel prices
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First Published: Tue, May 04 2010. 11 31 PM IST
Updated: Tue, May 04 2010. 11 31 PM IST
New Delhi: Unperturbed by its diminished majority in Parliament, the Congress-led United Progressive Alliance (UPA) is preparing to move ahead with decontrol of fuel prices to target burgeoning subsidies.
If implemented, it will link domestic and international fuel rates, which will push up retail prices and at the same time reduce the outgo on subsidies and the pressure on the oil marketing companies. It will, of course, also provide an inflationary push.
Some Congress party strategists say the government will be able to have its way by keeping allies on edge and thereby containing resistance within the ruling coalition against what are otherwise politically difficult decisions.
At the same time, the Congress has moved to patch up with the Bahujan Samaj Party even as it maintains friendly ties with the latter’s arch rival, the Samajwadi Party, and the Rashtriya Janata Dal in Bihar.
“The eGoM (empowered group of ministers) has been constituted and it will be meeting after the Parliament session is over on 7 May. There are no easy options. The oil marketing companies are bleeding,” said a senior petroleum ministry official, who did not want to be identified.
Late last month, the UPA constituted the eGoM headed by finance minister Pranab Mukherjee on decontrolling fuel prices, reiterating its intent to review the payout on subsidies. The other members of the panel are agriculture minister and Nationalist Congress Party (NCP) chief Sharad Pawar, fertilizer minister M.K. Alagiri of the Dravida Munnetra Kazhagam (DMK), and Trinamool Congress (TMC) leader and railway minister Mamata Banerjee.
In February, the government moved on reducing the outgo on fertilizer subsidy by opting for a nutrient-based regime, a decision that did not go down well with some of the allies such as the DMK.
The petroleum ministry had unsuccessfully moved a proposal based on the recommendations of a panel led by former Planning Commission member Kirit Parikh. The panel had suggested freeing petrol and diesel prices, and an increase in retail prices of kerosene and LPG (liquefied petroleum gas).
While admitting that any effort to accelerate reforms would require the backing of allies, Congress leaders said the party was confident about its plans.
A Congress general secretary, who did not want to be identified, argued that the party was on a winning streak and, hence, it was difficult for the allies to pose a challenge serious enough to threaten the coalition.
According to the same leader, the DMK, which has 18 members in the Lok Sabha, is in no mood to sour its ties with the Congress ahead of assembly polls scheduled in 2011.
The rival All India Anna Dravida Munnetra Kazhagam (AIADMK) “is also keen to enter into a political alliance with the Congress. As of today, the Congress is the party that can make the difference in an electoral battle”, he said. The AIADMK and its ally, the Marumalarchi Dravida Munnetra Kazhagam, have 10 members in the Lower House.
At least three Congress leaders said that the allies are on the defensive with two NCP ministers getting drawn into the Indian Premier League controversy and allegations of corruption against DMK minister A. Raja.
Political compulsions also appear to be forcing another crucial ally, the TMC with 19 members in Parliament, to stick with the UPA.
“We are confident that none of the allies will leave us now,” said P.J. Kurien, a senior Congress leader. “We will go ahead with our agenda, which includes both reforms and welfare measures.”
However, Bharatiya Janata Party leader Rajiv Pratap Rudy was sceptical about the UPA’s ability to accelerate politically sensitive reforms.
liz.m@livemint.com
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First Published: Tue, May 04 2010. 11 31 PM IST