Indian people can and must be protected from global speculators and profiteers!

The UPA Government announced steep hikes in the retail prices of cooking gas, diesel and petrol on 4th June, 2008.  Given that petrol and diesel are essential inputs in a wide range of productive sectors, these hikes are expected to have a major impact on commodity prices as a whole, which are already rising rapidly and lowering the living standards of the working class and people.

Government spokesmen are trying to justify this measure by claiming it is unavoidable due to the steep increase in international price of crude oil.  They are arguing that government owned oil companies cannot continue to bear heavy losses, and the government itself cannot allegedly afford to spend more on oil subsidies.  The actual facts show that the government spokesmen are lying to the people.

The first fact to be noted is that the price of crude oil in the international markets is ruling well above the social cost of production, or ‘value’ of crude oil.  In 2003, the average cost of production of one barrel of oil (1 barrel = 159 litres) was a little less than US$ 20 (equal to Rs. 900 at that time) on the world scale.  The selling price in the world market was US$ 25 at that time.  Since then, the amount of social labour required to produce a barrel of oil has not changed much; it may have gone up by 10% or 15%.  But the selling price has shot up to US$ 130 per barrel by May 2008 – which is more than 400% within five years.  What is the reason for this astronomical rise?  

Cutting off supply from Iraq, a major oil producer, and threatening measures towards Iran by the US State have contributed to the oil price increase. However, the fact that the market price is currently 5 or 6 times what it costs society to produce one barrel of oil reflects a very high degree of concentration and monopoly in this sector, and speculative activity in the crude oil market.  Big investment banks, oil companies and global traders are driving prices sky high, by deliberately forecasting a shortfall.  They are raising expectations that prices will keep rising further, so as to make money through speculation and forward trading.  This oil price bubble will also burst at some point, just like the housing bubble burst in the US, and the dot com bubble before that. 

The Government of India ought to take immediate measures to protect our people from the consequences of the activity of speculators and profiteers. Instead, Manmohan Singh and Chidambaram are claiming helplessness, which deserves to be condemned.  They have not even banned speculative activity in crude oil within the country.

The second important fact to note is that the Central Government collects much more taxes from crude oil and petroleum products than it spends to ‘subsidise’ the consumers.  The ‘oil subsidy’ spent in 2006-07 was Rs. 2785 crore.  On the other hand, excise and customs duties collected by the Central Government on crude and products was Rs. 71,893 crore. The people who buy cooking gas, diesel, petrol and other petroleum products are being made to pay taxes that are 35 times what they receive in the name of subsidy.

If the Central Government were to reduce excise and customs to zero on crude oil and petroleum products, then there would be no need for the people to pay more for petroleum products. On the contrary, retail prices would come down significantly, giving the people a welcome relief from the mounting inflation.

Apologists for the ruling bourgeois class would argue that the Central Government cannot afford to give up more than Rs. 70,000 crore of annual revenue.  But the reality is that there are many ways that this revenue loss can be compensated, without any negative impact on the economy and the people’s well being.  Suspending a part of annual interest payments to money lending institutions, until a future date, is one way.  Cutting back or postponing some of the arms purchases is another way.  In fact, non-productive expenditure (a rising defence and security budget) and tax cuts for the big bourgeoisie have contributed to inflationary pressures all around.

The third important fact to note is that the government owned oil companies are exaggerating the extent of loss they are allegedly suffering. Official statistics show that they together made more than Rs. 20,000 crore as profits after tax in 2006-07, and in 2005-06 and 2004-05 as well.  In the current year, while the exact amount of losses suffered by the government owned companies are not known, it is a well known fact that private oil companies like Reliance are making windfall profits. Reliance exports all the petroleum products it produces, and does not pay one rupee of tax on its super-profits. If the Central Government levies a hefty tax on these super-profits, then thousands of crores of rupees can be raised.

The facts show that the real reason for the price hikes announced by the UPA Government is that it is a government that gives first priority to the big bourgeoisie and its desire to reap maximum profits, just like its predecessor NDA Government.  Its top priority is to keep the big capitalists happy, not to protect the wellbeing of the working people.

Both the UPA and the NDA governments have been pursuing the policy of privatisation of oil exploration and production.  In 1990-91, the state owned ONGC produced 20 million tonnes of crude oil, and there were no private producers.  In 2006-07 ONGC produced 18 million tonnes, while private and ‘joint venture’ companies produced 4.7 million tonnes.  The privatisation policy is aimed at expanding the space for profiteers and speculators in this essential and strategically critical sphere of production. 

The working class and people of India must reject the lies of the bourgeoisie and government spokesmen.  They must unite against the attacks on their living standards, and raise the following immediate demands:

Reduce excise and customs rates to zero on crude oil and petroleum products!

Postpone interest payments and cut down arms spending to compensate the revenue loss!

Levy a hefty tax on private companies’ profits from exporting petroleum products!

Ban speculative activity in crude oil in the country!

Halt and reverse the policy of privatisation of oil exploration and production!