Government\'s Rush to Reform Off to a Rocky Start

September 14, 2012, 3:09 am

By HEATHER TIMMONS

Political leaders across India have condemned the central government's decision to raise diesel prices, and protests are planned around the country.

Mamata Banerjee, chief minister of West Bengal and an ally of the governing Congress party, told journalists she was “astonished” by the decision, which was made without her input, and said there would be a protest rally Saturday. Jayalalitha Jayaram, chief minister of Tamil Nadu, blamed the government for not slowing the falling value of the rupee, which she said might have averted the need for a price increase.

The Samajwadi Party, another occasional ally of Congress, said it planned to hold a sit-in to protest the increase, and called the move “anti-people.” The Congress party's main opposition, the Bharatiya Janata Party, accused Congress of trying to “loot the common man” with the increase, and said it would not allow it.

Analysts and economists, on the other hand, approved of the decision, calling it a sign that the government was finally making tough decisions.

The price increase was the first in a series of changes the government is attempting in coming weeks to reduce the budget deficit and kick-start a slowing economy. The diesel price increase of 5 rupees per liter, or 14 percent, is the first in more than a year and brings prices in Delhi up to 47 rupees per liter. The government also said Thursday evening it would limit the number of subsidized cooking-gas cylinders to six per household.

Raising diesel prices is seen as one of the most politically sensitive of these changes, and the increase Thursday night was not anticipated even by some governmen t advisers.

Diesel remains a highly-subsidized fuel in India, and price increases particularly affect the country's farmers and truck drivers. “The price hike on diesel will break the backbone of the farmer,” an unnamed farmer from Haryana State told NDTV, a local television channel. “The diesel price increase will affect the use of tractor for ploughing our fields and use of pump for field irrigation.”

But many of India's businesses and upper-class private homes also rely on diesel generators when the electricity fails, a common occurrence in some areas.