From Business World of 5 May 2004. Ram Naik had won from Bombay North constituency for a quarter century without a break; until he became petroleum minister in 2003 and made a mess, he had a clean reputation. In the 2004 general election, the Congress set up Govinda, a film actor, against him; Govinda defeated him.
All power to Govinda!
I am that exceptional Indian: I have never seen Govinda in
a film. I have been seeing him a good deal recently in the newspapers; but if I
met him I do not think I would recognize him. Still, he is the only candidate in
this general election whom I wish all good luck. That is because he is standing
against Ram Naik. I think Ram Naik has been a disastrous petroleum minister,
and it is important that he should not return.
The minister presided over the
largely publicly owned oil industry. Oil and Natural Gas Corporation (ONGC) is
India’s largest company. It is hugely profitable because it sitting on the rich
fields of Bombay High where the cost of extraction is a fraction of the current
oil price. Till the 1990s, the government used to make ONGC sell its crude to
government-owned refineries at a price below the import price. For the
refineries it had an Oil Price Equalization Fund. Wherever they were located
and whether they used ONGC’s cheap oil or imported expensive oil, this fund
ensured that they paid the same price for the crude they used. The prices of
their refined products were also controlled, and kerosene – supposedly the
illuminant of the poor – and diesel oil – the favourite fuel of the heroic
farmers’ irrigation pumps – were subsidized by petrol, the fuel of rich
capitalist scooter riders.
This system of rampant
cross-subsidies came under threat when the government signed the Marrakesh
agreement in 1995; under it, the domestic market for oil had to be opened up by
2001. Realizing this, Vijay Kelkar, when he was petroleum secretary, laid out a
road map: the cross-subsidies would be replaced by differential excise duties,
and the Oil Price Equalization Fund would be abolished on 1 April 2001.
There were other elements of
central control and patronage too. Some 70 million tons of oil was being
imported; the petroleum minister gave out the contracts to his favourites. One
such favourite industrialist I know came to Delhi, flew abroad with the oil
transport contract he got from the minister, went and ordered a tanker on
deferred credit, and eventually became the owner of the tanker without
investing a penny. And then there were hangers-on whom he gave out licences to
set up petrol pumps. The courts uncovered a terrific racket that operated in
the reign of the last Congress petroleum minister – he was recently seen
chauffeuring Rahul Gandhi in UP – pump licences had been given out to friends
and relatives of Congress leaders – and of his personal assistant.
After this scandal, Ram Naik, who
followed him, set up committees of district-level worthies to hand out the
pumps. Then in 2000, a newspaper published the list of those selected.
Surprise, surprise! They too were friends and relatives of politicians.
Vajpayee, who at that time cared for a clean image, cancelled the allotments,
and landed the government into a soup: the allottees, many of whom had set up
pumps or spent money on setting them up, went to court, and the Supreme Court
made the government honour its commitments. After this fiasco, Ram Naik retired
from the pump allotment business, and left it to the refiners.
The Oil Price Equalization Fund
was abolished on time. But the price controls it administered were replaced by
orders from Ram Naik. The oil refineries were forced to subsidize kerosene from
their own profits. And as international crude prices rose, they were forced to
hold back price increases. And he could hope to give such orders only as long
as the oil companies were in government ownership. So he sabotaged their
privatization.
There was one fly in the
ointment: Reliance had set up a huge refinery in Jamnagar to produce 33 million
tons of refined products. It did not have to obey the minister’s orders to hold
back prices or subsidize kerosene. So an arrangement was made: the government
refineries bought Reliance’s products wholesale and sold them retail. That
arrangement, however, is under severe strain. There have been disputes between
Reliance and the government refiners over how to share the cost of the
minister’s orders; and the refiners have built new capacity and do not want to
market Reliance’s products. Reliance needs to build or have access to pumps;
and once it or Shell or Cairn sets up pumps, the government’s control over pump
prices will have to go.
If Ram Naik comes back, he will
never relinquish that control. So it is best that he should not come back.
Govinda, you had better make sure he does not!
