Mamata's Fixed Price DNA Spells Disaster

The Trinamool Congress may gain political capital by saying its DNA does not allow prices to rise. But by selling this perpetual dream to voters is unfair, economically and socially.

Govindraj Ethiraj
Published: 15, Mar 2012

Govindraj Ethiraj is former Founder-Editor in Chief of Bloomberg UTV, a 24-hours business news service launched out of Mumbai in 2008. Prior that, he worked with Business Standard newspaper as Editor (New Media). Earlier, he spent five years with television channel CNBC-TV18 where he worked from near start-up point. Before CNBC-TV18, he worked with The Economic Times newspaper as Corporate Editor in Mumbai for five years, looking after the corporate and markets news bureau. He also worked with Business World for three years. He began his career with Business India magazine. He is a Fellow of The Aspen Institute, Colorado. He is presently co-authoring a book on India’s efforts to give over a billion residents a unique, biometric identity - after concluding a short, voluntary stint with the Unique Identification Authority of India (UIDAI) - before returning to full-time journalism shortly.

During a television debate over the Mamata Banerjee–Dinesh Trivedi face-off over the fare hikes proposed in the Railway Budget 2012, I asked Communist Party of India (CPI) leader Gurudas Dasgupta whether he was advocating that rail fares should never be hiked, or held in perpetuity.

Dasgupta’s response in the Headlines Today debate was that he was not against fare hikes in principle. His point, he said, was that this was a bad time to do it because rising prices and high inflation had already put severe stress on India’s poor.

The Trinamool Congress (TC) led by West Bengal Chief Minister Mamata Banerjee on the other hand is arguing that they are against fare hikes in principle. This view was amply articulated by its party members Derek O'Brien and Sudip Bandopadhyay. The phrase used repeatedly: “It is against our party’s DNA to do so.”

O’ Brien later said he tweeted against the fare hikes within 5 or 6 minutes of the Railway Budget being presented in Parliament because he was so sure that a fare hike would cause a flutter within his party and with his party leader Ms Banerjee.

The Congress on the other hand, at least in the words of one party leader Mani Shankar Aiyar,  argued that a railway fare hike was an equitable distribution of burden. BJP leader Sudheendra Kulkarni dismissed the Congress position as intellectual arrogance. He felt the resource requirements were so large that a fare hike would not solve the problem. He did not directly address the question of equitable distribution.

Now, its quite likely that all the political parties and their representatives are variously posturing for their respective constituencies. A CPI saying it will allow fare hikes (at appropriate non-inflationary times) does not mean that it will. A BJP saying a fare hike is not the main issue does not mean it will not hike either, were its hands on the driving wheel. And finally, for all of Congress’ expostulations on equitable distributions, it’s one of the biggest freebie givers in history.

To be fair (mostly), the Trinamool Congress’ point about DNA is consistent. Ms Banerjee has raged a battle royale whenever there has have been fuel price hikes in the last five years. On one occasion she called for a bandh in Bengal. This was in April 2008 when she was protesting both the Centre and Bengal State Government’s `inability to check spiralling prices’. Incidentally, the BJP said it was against bandhs but would extend moral support to Ms Banerjee, rising prices ‘being such an important issue’.

Consistent or not, the positioning about a fixed price regime, even to poor voters, is worrying. To win elections on the premise that prices would not rise is fair, since every politician would potentially do that. To hold on to the argument and not educate voters subsequently seems counter intuitive and even unfair.

It’s not just about rail fares. The argument could extend to any public utility. A section of voters will always assume that they would either get things free (as in the case of power in many states) or will pay prices which belong to a different era.

This perpetuates already existing distortions in the economy. Including those created (to some extent) by schemes like the National Rural Employment Guarantee Act where assured employment and a Rs 100 daily dole has wreaked havoc on the job market.

Admittedly, a Rs 4,000 crore inflow from a fare hike (if allowed) will help fill some bits of a Rs 140,000 crore hole (cost of safety and modernisation) annually for the next 10 years. The Railways desperately need money to shore up safety. And this will surely not come from passengers. But that's not an argument for a fixed-price world.

Moreover, many passengers themselves (at least in cities I've heard) are saying they are willing to pay more for better services. And the security of safety. Many farmers across the country are willing to accept that paid-for and assured power is better than unpaid, unpredictable power that makes life miserable for them and their crops.

This is not to say that the Government should not be attacked for spiralling prices. Indeed, the Government has spectacularly failed to manage the supply side, particularly on food, leading to skyrocketing prices and high inflation. The Government has also failed to bring about efficiency on the distribution side, in foodgrains and public distribution systems for example.

But by propounding an utopian world where prices remain fixed and nothing changes, except, presumably the colour of Kolkata's buildings to blue, Ms Banerjee is being unfair not just to her coalition partners but worse, to her own voters. In the end, it is them who will pay the price. She is only buying political time and mileage by railing against these decisions.

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