No fuel subsidy burn for PSUs
This refers to the editorial “Right fuel mix” (FE, August 24). The subsidy provided on domestic LPG, kerosene and other petroleum products translates to a huge fiscal burden on the government, draining the nation’s precious resources which could otherwise be used in developmental activities.
Economists often use the criterion of Pareto superiority to assess outcomes of government’s fiscal policies. If a change results in an outcome in which gainers can compensate losers, and still be better off, the changed outcome is deemed Pareto superior. The gainer from subsidy reduction is the government. The ‘#GiveItUp’ campaign which aimed at motivating LPG users who can afford to pay the market price for LPG to voluntarily surrender their LPG subsidy garnered the support of nearly 1.1 crore people. Excluding the high income group from availing subsidy on LPG cylinder was a welcome step to widen the ambit of subsidy rationalization. Recently, by allowing oil marketing companies to increase the retail price of kerosene sold through the public distribution system, the Modi government took another leap forward in reducing subsidy on environmentally harmful fuels.
Now, footing the subsidy bill of oil PSUs in the event of falling crude oil prices will not only boost their share prices but also increase the capital value of PSUs to make their disinvestment a more viable proposition in the coming fiscal years. Moreover, the government can always take a leaf out of the UPA’s notebooks and shift the subsidy burden on oil PSUs once the price rises. For a healthy economy, it is imperative to maintain an equilibrium in fiscally significant sectors. .
Shreyans Jain, Delhi