Column : Their debt and ours

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Apples and oranges should not be compared. Notwithstanding I am going to make such a comparison. I am going to focus this article on the links between the financial crisis in the West and the burgeoning debt position of the public sector oil companies IOC, BPCL and HPCL. I realise that by making such a comparison I could be accused of trivialising the former and exaggerating the latter. That is clearly not my intent. I know that the West has been hit by an unprecedented financial tsunami which has already reshaped the map of Wall Street and which may well redefine the ideological underpinnings of the capitalist system. I also know that by contrast the oil companies face no more than a localised downpour. Their exposure to Indian banks has grown alarmingly and their management must wonder how they will ever redeem this debt but the amounts involved do not at least for the present, pose a systemic risk. Were corrective steps taken now the financial consequence need be no worse than an uncomfortable drench.

I make the comparison because there are some similarities but more so because I want to draw attention to the potential consequences of our current petroleum product pricing policy.

The financial jargon of mortgage backed securities, collateralised debt obligations, credit default swaps etc tends to obscure a simple fact. The present crisis has occurred because the ‘Masters of the Universe’ in Wall Street forgot that the business cycle cannot be wished away through mathematical brilliance and financial sleight of hand. Markets do rise but they will also inevitably fall. There is no inexorable one way bet. They all got it horribly wrong.