‘Supplementary’ or central concerns?

Shishir Sinha
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Fuel price hikes on the horizon? — A. Roy Chowdhury
Fuel price hikes on the horizon? — A. Roy Chowdhury

This week will be worth watching for some action in Parliament.

The action expected is not merely on account of disruptions in the wake of Coalgate and demands for Prime Minister Manmohan Singh’s resignation on the issue of non-transparency in allocation of captive mining blocks — raised by the Comptroller and Auditor General of India.

Nor are we expecting any major legislative business to be transacted in the remaining five days of the monsoon session, which has been a virtual washout on this count. The Chemical Weapons Convention (Amendment) Bill and the Rajiv Gandhi National Institute of Youth Development Bill are the only ones to have received Parliamentary assent so far this session.

The only significant economic Bill, with some chance of being taken up, is the one seeking to enhance the voting rights cap for individual shareholders in private sector banks from 10 to 26 per cent. The Banking Laws (Amendment) Bill is listed for consideration and passing this week, but whether that would happen is anyone’s guess.


More important than all of these, is whether the Government would introduce the first batch of Supplementary Demands for Grants, to obtain sanction for spending more money than what Budget 2012-13 had provided for. This has huge implications, as far as the oil marketing companies (OMC) and fertiliser firms are concerned.

The three OMCs — Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum — posted combined losses of Rs 40,500 crore for the April-June quarter. Although the Budget has provided a sum of Rs 43,580 crore as petroleum subsidy, much of this has already gone towards clearing the dues owed to the OMCs for last fiscal.

In June, the three public sector oil retailers were paid Rs 38,500 crore to cover their ‘under-recoveries’ — arising from selling diesel, kerosene and LPG below their realisable market prices — for the last quarter of 2011-12. That leaves just over Rs 5,000 crore with the Government, which can finance their under-recoveries for this fiscal.

In the absence of any Supplementary Demands for Grants in the monsoon session, the Government has only two options. The first is to wait till the next Winter Session in November-December to table the same. However, the question is: Can the OMCs wait that long, that too in a scenario where first-quarter losses alone have crossed Rs 40,000 crore?

If the Supplementary Demands are not introduced and passed next week, one can easily do the maths on the second quarter results of the OMCs — that the cumulative losses for the fiscal would approach the Rs 1,00,000 crore-mark is a no-brainer.


That only leaves the second option, which is allowing the OMCs to raise retail prices of diesel, kerosene and LPG, at least to prevent the under-recoveries from mounting further. Is this the plan?

Well, if the Supplementary Demands don’t happen this session — the Finance Ministry is apparently not averse at all to skipping it — it becomes inevitable and the price hikes can take place immediately after the session ends on Friday.

The same applies to fertiliser subsidy, where again, the Budget estimate of Rs 60,974 crore is about Rs 20,000 crore short of what the industry requires. In this case, though, the urgency for raising prices of urea may not be as immediate as for diesel. The Government can probably wait till the next Winter Session to seek Parliament’s approval for spending more than what was budgeted.

From the Finance Ministry’s standpoint, the current political stand-off that has forced repeated Parliament adjournments may not be wholly welcome. With all the focus on Coalgate and Manmohan Singh, a skipping of the Supplementary Demands for Grants would, willy-nilly, lead to a capping of the Centre’s spiralling subsidy bill.

(This article was published on September 2, 2012)
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