Healthy democracy is not built on the piles of burning tyre, but rather through the concerted nurturing of its principles in the temple called ‘parliament’
By Yurendra Basnett
Mob politics has consumed Nepal, ushering in an era of political anarchy. A loose coalition of politicians, with the most despicable history, sit in the parliament as the representatives of the nation. A close examinations of each renders one to conclude that either we have “chosen” the wrong lot, or who represent us mirror our own individual incapacities. And the ones on the political fringes are even more unconvincing. One is left with no option than to curse one’s own fate for the utter lack of sound, visionary leadership. In apathy, one’s analysis retires to the conclusion of Nepal’s political fate to oscillate for much of the near future to that of the Southern neighbour’s states of Uttar Pradesh and Bihar. Our best bet is Uttar Pradesh and our worst nightmare is Bihar. The present row over the political mismanagement of petroleum prices is but one example of the current political scenario.
Students from all student unions protesting against the hike in price of petroleum products by burning tyres and blocking the road at Putalisadak, Sunday morning, Aug 20 06. nepalnews.com/ANA
The government’s decision to adjust prices of petroleum products is in keeping with the economic realities confronting the state-owned ‘Nepal Oil Corporation’ (NOC). The international prices of petroleum products as estimated by West Texas Intermediate stands at $75.03 – an increase of 21% in one year (Economist. August 19-25, 2006). However, the government of Nepal has been subsidizing petroleum products, which it imports from India, incurring a loss Rs 840 million per month. Cumulatively, the Nepal Oil Corporation is knee-deep in the debt of Rs 9 billion. The current adjustments were aimed at reducing the debt of NOC – a possible outcome of negotiation with Indian Oil Corporation few weeks ago. As the result, retail price of petrol was fixed at Rs 84.25 per litre, diesel at Rs. 59.08, kerosene at Rs. 59.21 per litre (subsidized kerosene at Rs. 52.41).
Even with these changes, retail prices of petroleum products in Nepal is less than that of India; often resulting into illegal leakage to Indian market. The price differential in the two markets (Nepal and India) coupled with porous border produces a natural economic incentive of reverse leakage, which will be difficult to curtail without price convergence in both markets. The current NOC regime of subsidization has only put the government in a tight fix. To continue subsidization means to continue incurring losses, and to discard subsidization means political backlash that none would want to face up to. However, the inevitable decision is to either perpetually treat the symptoms or head for the cause itself. The latter entails, whether now or later, embracing the market.
Effective long- term solution lies in the government prudently allowing a greater role for the market – private actors – not only in distribution but also in procurement. Furthermore, the essential function of the market – in setting prices – must be left (to a large degree) to the forces of demand and supply. The government (on the other hand) – through NOC – should elevate its role to that of the umpire, and through effective usage of ‘tax regime’ ensure that the functioning of ‘oil market’ is in tandem with the economy at large. This will redress the loss incurred by NOC, which we often fail to realise must be compensated through state coffers – “that’s your tax money!” And that money (saved) can be more appropriately used for say – better schooling, better health facility – “you could decide, if only you would tell your representative what you wanted instead of burning tyre, and if only your representative listened to you instead of pulling the next guy down to climb up”. Furthermore, with greater role of the private sector, it will increase job prospects. Also, with multiple companies competing with each other, prices will gradually reflect marginal cost and the benefit at the end will go to the consumer. A good example is our own domestic airline industry. The government instead of incurring losses now accumulates revenue through taxation, which once again plays a vital role in providing air-supply to the claustrophobic public expenditure. Through reforms, we could reduce our economic dependency on India – lessening the need to plead to the southern neighbour.
Rather than common sense prevailing in the minds of the nation, it is sheer rage that gets expressed in the most aggressive form in the streets. It is one thing to protest for one’s rights, it is another to protest for everything – the latter being ‘mob politics’….. Rather than playing Mary-go-round, the political parties should collectively address this problem through proper application of economic principles.
Rather than common sense prevailing in the minds of the nation, it is sheer rage that gets expressed in the most aggressive form in the streets. It is one thing to protest for one’s rights, it is another to protest for everything – the latter being ‘mob politics’. No doubt that the recent price adjustment was significant, which would have adverse impact on the consumer, with the greatest burnt on the poor. But neither is the current reversal of the price adjustment a long- term solution. And whichever way we argue this, the loosing side will always be the poor when problems are compounded with political mismanagement. The benefit for the poor – and the entire country – lies in sustainable solutions to economic problems. And not the one proposed by ‘Nepal Workers and Peasant Party’ (NWPP), which entails ‘corruption control’ and ‘reduction in staffing’. The first – corruption control – is a euphemism that we love to throw around. The current NOC regime will always give way to ‘rent seeking’ and, therefore, corruption can only be curtailed through privatization – a bullet that the NWPP will never be willing to bite itself. Second, ‘staff reduction’ – possibly true – but again, will NWPP or for that matter any political party face the political backlash of laying off the staff? Therefore, an economic problem requires an economic solution with political back-up. So, rather than playing Mary-go-round, the political parties should collectively address this problem through proper application of economic principles.
Finally, this incident requests one to draw a broader conclusion to the current political scenario. First, to the political leadership and people’s representative(s) – “your surrendering to the whims of populist demands is the first sign of political anarchy”. Second, where did all the ‘erudite civil society’ disappear on this matter – their role is sought after in initiating public debate and informing both the public and the government. Third, the above problem is merely a sub-set of the problem confronting the ‘national economy’ at large. Sound economic management of national economy has been effectively marginalized by political mismanagement, resulting in ‘fire-fighting approach’ to all economic ills. Fourth, a healthy democracy is not built on the piles of burning tyre, but rather through the concerted nurturing of its principles in the temple called ‘parliament’. Finally, the oil fiasco reflects the depressing ‘state of the state’ and makes one yearn – ‘where did we loose our leaders’.
(Basnett is working as a Trade Economist at the Overseas Development Institute, U.K./Ministry of Trade, Government of Vanuatu, Vanuatu and can be reached at [email protected].)
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