With assembly elections to Gujarat and Himachal Pradesh and also the Winter Session of Parliament behind us, the coming few weeks could see the Government take some politically tough decisions relating to rationalisation of urea and diesel prices, apart from rail passenger fares.
The first signal in this direction came from the Railways, which, on Saturday, announced a trebling of surcharge on tickets that passengers travelling by local trains in Mumbai pay over and above the basic fare.
The surcharge on second-class tickets for all distances above 10 km has been raised from Re 1 to Rs 3, while even first-class commuters and holders of monthly/quarterly season tickets will have to pay three times the existing surcharge from January 1.
The Railways may well extend similar hikes beyond Mumbai locals to trains across the country. Rail Minister Pawan Kumar Bansal had given ample indication of this, after taking over the portfolio long held by regional parties from Bihar and West Bengal.
News reports have quoted Bansal’s deputy, K.J. Surya Prakash Reddy, as saying that passenger fares will have to be raised “by 5-10 paise per km”, if Railways were to even partially bridge the losses of Rs 20,000 crore-plus from its passenger operations annually.
Diesel, urea prices
The same goes for diesel, where oil marketing companies are incurring an under-recovery of Rs 9.28 a litre even after the hike announced in September.
No less serious is the situation in urea, where the maximum retail price (MRP) has remained practically unchanged for more than two-and-a-half years.
Since April 2010, when prices of all non-urea fertilisers were decontrolled, the MRP of di-ammonium phosphate has gone up from Rs 9,350 to about Rs 24,000 a tonne and that of muriate of potash from Rs 4,455 to Rs 17,000.
On the other hand, the MRP of urea has gone up only marginally from Rs 4,830 to Rs 5,365 a tonne. The fact that urea manufacturers haven’t been receiving subsidy in time from the Government for selling the nutrient way below costs has further aggravated the situation.
The greater the delay in action on these fronts, the more difficult would implementation get, given the long election season that is approaching.
This season begins with assembly polls to three North-East States (Tripura, Meghalaya and Nagaland) in March; Karnataka in May; and Rajasthan, Madhya Pradesh, Chhattisgarh, Delhi, Jammu & Kashmir and Mizoram in October. This would lead to the main Lok Sabha elections in April-May 2014.
Practically speaking, then, the next two months offer the only window for doing politically not so palatable things: Even the Budget, being the present Government’s last full-fledged exercise, may be oriented more towards populism.
To cap it all
Meanwhile, it would be interesting to see whether the Government will go ahead with its move to increase the annual cap on subsidised LPG cylinders from six to nine per household. Petroleum Minister Veerappa Moily had indicated this possibility while talking to media-persons on December 11, but was promptly ticked off by the Election Commission for doing so at the time of the Gujarat polls.
Now that the polls are over, the Government — more so the Finance Ministry — may, perhaps, not be so enthusiastic about raising the cap, which would entail an additional subsidy of Rs 9,000 crore for a full year and Rs 3,000 crore in 2012-13 alone.
This week, the Union Cabinet will meet to consider a hike in the minimum support price (MSP) of wheat by Rs 100 a quintal. While the MSP for rapeseed-mustard, chana and other rabi crops has already been fixed, the Government is to yet to decide anything on wheat. The Commission for Agricultural Costs and Prices had earlier recommended that the wheat MSP be frozen at last year’s level of Rs 1,285; but now the thinking apparently is to go for a Rs 100 hike, which will also partly offset the political opposition to increase in urea prices.
The Cabinet may also take up disinvestment of 12.5 per cent Government equity in Rashtriya Chemicals & Fertilisers (RCF). The Government has raised around Rs 6,800 crore in the current fiscal from stake sales in NMDC and Hindustan Copper. A urea MRP hike would make the RCF divestment further attractive.