Finance Minister Pranab Mukherjee has
a unique ailment. He is suffering from sleepless
nights which are not caused by indigestion, fever,
flatulence, gout or catarrh — all favourite Bengali
diseases when properly pronounced, with their well
known, oft-repeated and exhaustively documented
symptoms of distress. His sleeplessness is due to a
New Delhi-based non-Bengali disease called
‘subsidies’. No worthwhile Bengali medical doctor
nor village vaid can cure our Pranab-babu of this
strange disease. One would think that Bengali
economists posing as ‘doctors’ might be of help.
Though there are many of that ilk, after reading
this piece you might be led to believe that even
these voluble worthies can’t solve the gentleman’s
problems. Here’s why…
Though economists have written tomes on subsidies,
the fact is that these pervasive creatures are
progenies of politics and not of the dismal science.
Rulers decide on subsidies to satisfy their
political needs — be it ashrafis flung on the
streets by the Nawab of Avadh for getting cheap
kicks of seeing the poor jump after the coins, or
under-pricing of fertiliser to get the support of
farmers, or letting thousands, nay millions, get
away without paying the right price — if any is paid
at all — for their electricity. Politics is the
raison d’être of subsidies. Because the language of
subsidies is financial, economists falsely believe
that such hand-outs lie in their bailiwick. They
don’t. Never did. And never will. Subsidies are pork
barrel. To the best of my knowledge, pork barrel is
all about politics.
That brings me to my first point. We are two years
and a bit away from the next general election, which
will either make or break the Congress and, in its
wake, determine the fate of the First Lad of this
progeny-driven nation called India. Why would the
Congress, to which Pranab-babu belongs and whose
imprimatur must necessarily be writ upon the Union
Budget, decide to run the risk of decapitating
itself by dramatically reducing fertiliser subsidies
— and thus have the farmers of the Punjab, Haryana,
western, central and eastern UP, the fertile
Gangetic plains of Bihar, the canal colonies of
Rajasthan, the Malwa region of Madhya Pradesh,
western and central Maharashtra and the sugar belt,
the Konkan, the wet districts of Andhra Pradesh,
Udipi, and the rice bowl of Tamil Nadu cry “Blue
Murder” in hundreds of tongues and many millions of
votes? Better the diminutive Bengali babu suffers
from sleepless nights, burping smelly fiscal
deficits from early slumber to late light than the
party and the High Command be hung, drawn and
quartered in the elections. Doesn’t that ring a
politically sensible, though fiscally irresponsible,
bell?
Now to my second point. Even if the High Command
allowed Pranab-babu some fiscal Gelusil or Milk of
Magnesia and camomile tea, how much would she
permit? Let us take fertiliser. The budget estimate
(BE) of 2010-11 was Rs.49,981 crore. It was overrun:
the revised estimate (RE) for 2010-11 was Rs.54,977
crore. The BE for 2011-12 was Rs.49,998 crore, which
will be certainly overshot by a large margin thanks
to the hike in crude oil, petrochemicals and urea
prices. It may be between Rs.59,000 crore and
Rs.60,000 crore. Will Pranab-babu (a) Keep it flat?
(b) Slash it by 10 per cent? (c) By 15 per cent? (d)
By 20 per cent? (e) Or 25 per cent? And if (b),(c),
(d) or (e), will he have the authority not to
overshoot by even a whisker?
You know what that means? It translates to higher
prices for fertiliser. Similarly, if he wanted to
cut the petroleum subsidy from an estimated
Rs.30,000 crore for 2011-12 to, say, Rs.15,000 crore,
would the party allow diesel and, God forbid,
kerosene prices to go up? We know that the much
touted food security programme will cost somewhere
between 0.3 per cent to 0.5 per cent of GDP in
2012-13. Will Pranab-babu be given the license to
say, “I give you food security, and so I take away
sops on diesel and urea”?
I think not, even if Congress were to have a dream
run and bag 100 plus seats in UP, win in the Punjab,
and break the BJP in Uttarakhand. Of course, if it
doesn’t — that is, makes no more than 50 in UP,
loses in Uttarakhand and barely scrapes in the
Punjab — I certainly don’t see any subsidy
reduction. Only more sops. Indeed, I believe that
the finance minister has two budgets in his drawer:
one for the win and the other for the loss. The
second worse than the first.
Enough said. The fact is that Pranab-babu is the
only chap in this government who can get his way.
So, let him prove us wrong. If so, I’m sure that we
will contribute to giving him a life’s supply of
isabgul, Gelusil and kaliphos. In double-doses too.
Published: Business World, February
2012