Fuel for thought

The Opposition's bullock cart protest against last weekend's record increase in fuel prices had its poignant moments. They could only muster a dozen carts and the MPs' Monteros and SUVs followed on first gear.

But it did convey a message - whether we were trundling back to the bullock cart era. After all, the kerosene cart of yore is back on some streets.

It also brought back memories of 1973, when the then Opposition launched a larger bullock cart protest in the face of oil exporting countries (OPEC) unilaterally raising the price to US$ 3.65 a barrel.

Last week, the price rose to US$ 136 a barrel. The 1973 increase sent Western economies into a spin, suffering fuel shortages for the first time since World War II. The New York Stock Exchange shares lost US$ 97 billion in six weeks. The recent oil price hikes have had a similar effect on the world economy. The demand for oil is much higher than 35 years ago, with a much bigger global population and large countries like India and China guzzling much more for their growing economies than they did in the 1970s.

If the 1973 OPEC decision was to use oil as a weapon to punish the West and the US for its support of Israel, the recent price increases were a result of a combination of factors. These included uncertainties in the oil producing countries and the political instability triggered by the West and the US that have inveigled their way into the palaces of many of these OPEC countries - or shot their way in, as in the case of Iraq. When OPEC earned the wrath of the world, the economically poor countries included, it quickly launched a Fund for International Development aimed at providing concessional financing for the hard-hit poorer nations. But though 121 countries have benefited from this Fund, its impact is in no way comparable to the crippling effects on the economies of countries like Sri Lanka.

The Government held an emergency Cabinet meeting last Saturday, to decide what to do about the increased prices of world crude oil. No discussion was necessary. More than forty Cabinet Ministers with all their powers were powerless in the face of such stark realities, and the decision was taken to jack up prices. President Mahinda Rajapaksa asked the people to cut down on consumption, and said he would unveil plans to minimise Government spending. Alas, nobody raised the question of this Government's suicidal project to launch Mihin Lanka, a budget airline, whose fuel bill from its inception has been Rs. 650 million - only Rs.50 million of which has been paid to the Petroleum Corporation. With a bank guarantee for Rs.25 million, this Government-sponsored airline owes the Treasury Rs. 575 million.

This is the kind of absurdity linked to the present crisis. The Consumer Affairs Minister simply says, "We can't do anything about rising prices because of world market prices." That is the truth. But is it the whole truth? What has he to say of his Government's Mihin Lanka and its impact on the price of kerosene, diesel and petrol that the citizen has to pay for? The colossal waste and corruption in the Government have been talked of ad nausaeum, with little action being taken. The Minister admitted that the previous Government's policy of pegging local prices to world prices was a good one. Economists believe such a policy had good features, was transparent, and in line with international practices. Price increases were gradual.

It avoided periods of subsidization - something that benefited the consumer, but hit some other way through subsequent taxation or inflation, which meant that the poor had to bear the cost.

Despite the high prices - even after last Saturday's hikes - the Government's fuel bill will not come down significantly because much of the consumption is by the Government, Armed Forces and the army of politicians the country is feeding on the public purse. They don't pay for their fuel. Knee-jerk reactions have been the hallmark of this Government. Like in the rice crisis, the failure of a crop is met by opening letters of credit for import. Somebody has to pay these bills someday, and it may not necessarily be the politicians and officials who are in power today.

There are several macro and micro level decisions that need to be taken. Tele-conferencing is one way of ensuring public servants have minimum travel.

Yesterday, all the Chief Ministers met in Badulla. One can imagine the number of vehicles that made the trip on public account. It's not that such meetings should not be held, but how much of the work can be done by tele-conferencing. Innovation, new technologies and ideas borrowed from countries already cutting down on fuel, both for ecological reasons like climate change and cost factors, must be adopted. The sooner someone studies these options, the better. Quite apart from the Government cultivating good governance, the hard hit citizenry will be spared further blows to their daily lives.