The Hindu Business Line : Chidambaram favours reasonable oil price band

Singapore, March 26 The Union Finance Minister, Mr P. Chidambaram, on Wednesday indicated that India “would be very happy to form a cartel” among the oil-consuming countries to meet the current crude-price situation of “greed overtaking the common good of the world”.

Speaking on the theme of ‘Sustaining growth amidst global uncertainty’, Mr. P. Chidambaram said, at the Lee Kuan Yew School of Public Policy here, suggested that the G-7 industrialised countries or the G-8 or even the Group of 20 could “work on a price band” in the oil sector.

Answering questions from the audience and noting how crude prices had now spiralled from $34 a barrel to $110 in just four years, Mr Chidambaram said: “In the IMF meeting, I offered that we work on a price band: the consuming countries will guarantee the producers that oil prices will not go below a level, and the producing countries promise the consuming countries that prices will not go above a level [and] we allow prices to fluctuate within a band. This offer, made two years ago, was discussed by the IMF, but OPEC and other producing countries did not agree. I think that market forces must have some room for play. I am not disputing that. But it must be within a reasonable band. Oil producing countries have struck a gold mine; ... but it is hurting the world economy”.

Responding to the suspicions of politics behind his budgetary farm-loan waiver, Mr. Chidambaram said: “Elections (in India) are (due) in 2009. I don’t think the elections had anything to do with that. Why did I do it this year? I could not have done it in any earlier years (when) I had a huge fiscal deficit. It is only in 2008-09 that I am able to bring the fiscal deficit to below three per cent ... a worldwide benchmark. I had a 4.5 per cent fiscal deficit. I brought it down year after year. In 2008-9, I will bring it down to below three for the first time: 2.5. So, I have given myself fiscal space and some comfort to take on a massive debt forgiveness programme. If I had achieved this target last year, I would have done the loan waiver last year”.

On the mechanics of the farm-loan waiver scheme, he said he had “no fear at all” in regard to the scheduled commercial banks and the regional rural banks, both of which were well regulated by the central bank. But he was allowing himself “a margin of error of five per cent” in respect of some categories of cooperative banks.

Mr Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public Policy, presided over the meeting; and Mr. Chidambaram later signed copies of his book, ‘A view from the Outside’ at an interactive session organised by Kotak Mahindra in association with the Express Group, Penguin Books India and Institutional Investor.

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