Time for regular price adjustment

Tuesday, 14 February 2012 00:00 - - {{hitsCtrl.values.hits}}

First it was buses, then fishermen and now railways – the consequences of the unprecedented fuel hike are sweeping across the country, entrapping many. Thousands of commuters were stranded and unable to get to work or move about on Monday as the bus strike suffocated the public.

Meter taxis and three-wheelers saw a business boom as commuters resorted to the next cheapest method to get about, but even they were complaining of the losses incurred due to the fuel price increase. Despite the increase, private vehicles were out in force and traffic remained strangled as the day wore on.

Fishermen in five coastal towns were reported to have protested against the fuel hike, but the biggest shock came from the arrest of 46 people who had attacked CTB and private buses that were providing what little transport was possible. This is not only an ugly incident, but it also underscores the helplessness of the common people to resist the unfair demands of unions. The unions have a quarrel with the Government and therefore should not take their angst out on others who are either simply doing their job or attempting to alleviate the suffering of average people.

As the day wore on, more bad news emerged. Railway unions were the first to come out with fresh demands for salary increases, which they say will result in strike action after the New Year, unless their expectations are met by the Government. It is highly likely that the price increase will provoke more public servants to lobby for higher salaries, though that would result in core inflation increasing.

The Government’s promise of subsidy did not do much to help the situation as there were no clear procedures in place to deal with the protests. Everyone knows that fuel price hike announcements follow a set pattern. Immediately after the change many protest, buses demand fare increases or subsidies and bakery owners increase bread prices and there is speculation as to how much the cost of living will rise. Given this, the Government must already have had its response planned out and ready for implementation. If that had been done, then much inconvenience and hardship to the people would have been averted.

On a larger level, there is the challenge of making the subsidies corruption-tight to ensure that that the relief is given to the people who need it the most. The fishermen on strike, for example, have pointed out that their daily expenses for fuel have climbed from Rs. 3,500 to Rs. 4,500, resulting in no profits for them and higher prices for the consumer. In the end, the middlemen will have the most to again and this is true for every item of human consumption.

Subsidies are a stopgap measure introduced by the Government in desperation to handle to growing backlash, but what would their cost be and how will that be absorbed? How long can the subsidies continue to be given before the Government runs out of funds? What happens when the next price increase comes around?

Surely this has driven home the need for a flexible price adjustment scheme on a monthly or bi-monthly basis so that the Government cannot give false security for political reasons and shock the public into revolt.