july 13, 2013

A Cynical Government
Social welfare has become a means to hide corporate capture of national resources.
ne would have thought that after the revelations on the Commonwealth Games scandal, the telecom skulduggery and the coal block heists, the United Progressive Alliance (UPA) government would be a little careful about placing the interests of private groups over that of the common weal. That is not so. There is now a brazenness with which the UPA government is ever willing to shower benets on particular business groups. Two recent examples are the decisions to double the price of natural gas and, earlier, to favour Abu Dhabi with a fourfold increase in passenger trafc capacity between India and that Emirate. The decision to double the price of natural gas from $4.20 to $8.40 per million British thermal units (mmBTU) has been based ostensibly on the considered recommendations of a government committee set up to look into the issue. However, as independent analysts familiar with natural gas markets have pointed out, the methodology used by this committee seems to show no awareness of the structure of the market and the global prices and that the consequent formula is completely irrelevant. (See, for instance, Natural Gas Price Hike: Subsidising Producers Prots? in this issue.) It has also been pointed out that the rationale of a higher price attracting new investment to the sector does not wash, for similar price increases in the past decade have not yielded such outlays. This is not the rst time that the government has arbitrarily set prices for natural gas. It did so in 2007 as well when, of all entities, a Group of Ministers gave producers a price of $4.20 per mmBTU rather than under $3 per mmBTU that many at the time had argued was the more appropriate benchmark. Now, as in 2007, the unmistakable conclusion is that the government has set a price that will benet the largest gas producer in the country, which also happens to be Indias largest private corporate group. This company, which has continuously pressurised the government to raise prices without any reference to the costs of exploration or production, has violated the production sharing contract it had signed with the government; it has been found to gold-plate its investment in gas exploration and production; it has stonewalled an investigation by the Comptroller and Auditor General; and it is believed to have had more than one union petroleum minister shunted out of ofce for not doing its bidding. The latest price hike could, it has been estimated, give Indias corporate behemoth an additional largesse of as much as
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Rs 26,000 crore every year! All this for its extraction of a public natural resource, which, at the new rates, will either make power and fertilisers more expensive or call for larger subsidies to hold down their prices. Does one need more evidence of the hold of this particular corporate over government policy? If on gas the union cabinet took a decision, then in another instance an individual ministry has done what it pleases it, again to benet a particular private company. Air services rights, which decide the airline passenger capacity, between any two countries are bilaterally negotiated by governments. One of the most coveted routes from India is to West Asia and since the last decade the government has been liberally giving away rights to airlines of that region. Indeed, one reason for Air Indias present plight has got to do with UPA-I having been overgenerous in handing over rights to Dubai-based airlines. This time the Ministry of Civil Aviation has gone even further. On 24 April it signed a memorandum of understanding (MoU) with its counterpart in Abu Dhabi awarding it a threefold increase in the number of passengers it could y to and from India every week. That the MoU was signed on the same day as the national carrier of Abu Dhabi announced its decision to acquire 24% in a private Indian airline could of course only be a coincidence. And that the same Indian airline which stands to benet from seat expansion and infusion of foreign equity has been demonstrating its ability for close to two decades to inuence government policy in civil aviation is also of course just a coincidence. With all these coincidences raising a stink, we are now witness to the unseemly sight of the Prime Ministers Ofce trying to show that its hands are clean, implying that if there is any wrongdoing, it is the Ministry of Civil Aviation to blame! In this ongoing loot there is anarchy in the government as well. Corruption, manipulation of public policy and capture of economic resources by powerful private groups, none of this is new. Since the early 1990s, each successive government whatever its ideological persuasion has sought to surpass its predecessor in handing out public economic resources to private interests. It seems that since economic growth has accelerated the value of these resources has also grown and with it has grown the size of the appropriation for private gain. If this government has appeared to have taken the sanction of public loot to new heights, one can be 7

july 13, 2013

vol xlviII no 28

EDITORIALS

sure that the next government in New Delhi will seek to better it. It is very easy to square such brazenness in bowing to corporate interests with the UPA governments plans (now formalised in the form of an ordinance) to ensure food security

for a majority of the population. There is a cynical form of governance at work here. You can continue to oversee the asset-stripping of a country provided you can win electoral support with the promise of a major welfare programme.

july 13, 2013

vol xlviII no 28

EPW

Economic & Political Weekly