Feasible power sector reforms
Prime Minister Manmohan Singh’s recent comment on the need to rationalize energy prices in the country is understandable. With import dependence on oil as high as 80%, the burden on the exchequer is significant and constrains the government’s ability to spend on social welfare measures. This is besides the damage inflicted on the energy market as mispricing energy turns away private capital and blunts competitive forces.
There is no denying that it is a significant challenge to raise prices of mass consumption products such as diesel, kerosene and cooking gas for a coalition government. And, the Prime Minister’s stated approach to deal with the situation is optimal—that of increasing prices in a phased manner.
However, a long-lens view of UPA I and II’s performance thus far is a lesson in missed opportunities—prices have hardly been raised in a phased manner.
And now this option looks even more difficult. General elections are a year and half away, with several state assembly elections due in the interregnum. These are events that “pause” price revisions, lest it adversely affect voter sentiment.