Fuel protests bring India to a halt

Transport and businesses across India were severely disrupted on Monday by a dawn-to-dusk strike called by opposition parties to protest against the government’s decision to raise fuel prices.

Many flights, long-distance and local trains, and bus services were cancelled; businesses – from large IT companies such as Infosys and Wipro to small grocery shops – were closed; and trading volumes on the Bombay Stock Exchange plummeted. Many schools and colleges stayed shut and private vehicles stayed off the road.

India’s Hindu nationalist opposition Bharatiya Janata party and the leftist parties had called the national strike in protest at the government’s decision last month to raise fuel prices when Indians were already reeling from double-digit inflation.

Vijay Sharma, a government administration worker from Delhi, explained why he had participated in a BJP rally supporting the protest: “We have nothing left at the end of the week to save, everything is too expensive; the cost of housing, transport, education and food,” he told the Financial Times.

“We also get taxed so much. How are we to meet the ever-increasing demands of our children?”

The BJP, which has been torn by internal rivalries and feuding since its defeat in last year’s parliamentary elections, and the Communist party, which now controls just two states, have vowed to keep up the pressure until the government reverses its decision.

But as it struggles to curb its widening deficit, the government of Manmohan Singh, prime minister, has insisted that it will stand firm, saying India, which imports nearly 80 per cent of its crude oil, can no longer afford the huge cost of keeping domestic fuel prices below world market levels.

“There is no question of a fuel price rollback,” Pranab Mukherjee, finance minister, told Indian journalists shortly before the 12-hour strike began.

Analysts did not expect a repeat of Monday’s disruptive strike, which the Confederation of Indian Industry said cost the economy about $650m (€519m, £431m).

“Honestly, I don’t think the BJP’s heart is in this,” said Pratap Bhanu Mehta, president of the New Delhi-based Centre for Policy Research. “My own sense is that it is largely symbolic.”

The BJP draws its core support from India’s prosperous trading community, which would be hard hit by strikes, and which Mr Mehta described as “the same class that is least worried about this inflation.”

Congress ended state control over petrol prices last month, and vowed gradually to phase out subsidies on diesel, measures that Mr Singh called “much needed reforms”.

The government also raised the prices of still highly subsidised kerosene and cooking gas.

“The subsidies for the petroleum products have reached a level which is not connected to sound financial management of our country,” Mr Singh said a few days after the moves.

“This decision has been taken to put some burden on the common people, but I think it is manageable.”

Even after the price increases – which will save the government an estimated $5.2bn – New Delhi will spend about $11.6bn in the current financial year, holding domestic retail prices of diesel, kerosene and cooking gas below world market prices.

In 2002, the then BJP-led government tried to deregulate India’s state-controlled fuel prices. When global crude prices shot up a few years later, however, the ruling Congress, which had returned to power on a pledge to look out for the “common man,” party ordered state-owned oil marketing companies to hold retail fuel prices down.

However, the government’s top economic advisers, and most economists, were unanimous in seeing the subsidy regime as unsustainable.

“All the political parties have at one time or the other acknowledged that India . . . has to move domestic prices in line with international trends,” Vikram S. Mehta, chairman of Shell India, wrote in a newspaper commentary on Monday.

Higher fuel prices were expected to add to India’s inflation, which rose to10.2 per cent in May. The BJP said it objected to the timing of the fuel price rise, which it said would exacerbate public hardship caused by the increase in prices of food and other items. However, analysts said the Congress probably felt it had to act now, well ahead of state elections.