Tuesday, March 2, 2010

What is so populist about it, Dr. Singh?

Does our beloved Prime Minister Know that the country is touching 1.2 billion in population and the most populist idea is a decent life for all of them?

I heard the answer on the aircraft (through TV). I am shocked and appalled by the PM's ignorance of the letters of the budget. Nowhere (you can download and read it too) in the budget has it been said the oil subsidies would be removed.

The 2 things introduces are:
1. Duty of imported crude (Yes, in-spite of big ticket Private entries in Oil exploration, we still import crude).
2. Excise duty on Petrol and diesel.

None of these taxes would go to Oil subsidy pool. Subsidy remains as it is.

If he is so pro-market forces, why no open the oil market for foreign players as well. He is not pro-market or pro-investment (just pro-buddies).

I am not sure if I have convinced you or not. Lets try a simple illustration: Assume Mr. X is Indian oil company and he imports crude. Since historically (Thanks Mrs. Gandhi) oil companies were for-ex starved and they were nationalized, Govt. of India gave subsidies to allow "fuel for all Indian", they get half the money from the GOI as subsides.
For these transactions, Mr. X has to pay the duty for importing. Imagine, Its like taking a rupee back from a beggar from a sum of 10 rupees.
Now poor Mr. X takes the crude to refinery and makes finished product. Even the production is subsidized and the different products attract different Excise duty. Finally there is a OTC sales tax.
So actually, you would these 2 duties does not reduce the burden the subsidy pool. Let me remind you that Dr. Singh & his buddies don't pay for the subsidy but you and I do (And the debt we leave behind for future generations).
No other country in the developed world has a GDP higher than India; if we can't give subsidies for the poor now, then when?