Submerge in subsidies

There are many arguments made in favour of subsidies, especailly energy subsidies. In a country like India, the most obvious argument is that they give a leg up to a huge mass of poor people who would otherwise find cooking, transportation and whatnot cripplingly expensive. Pro-people as Mamata Banerjee would like to say.

But there’s no such thing as a free lunch, as economist Milon Friedman said. Subsidies come with a price for the larger economy. They often boomerang on the people they are supposed to help. And they often go the wrong people.

The energy subsidy story in India is replete with such stuff.

One, subsidies add to inflation. The Indian government is wallowing in red ink. And there can be no doubt that this huge monetary outflow is a key reason prices are rising. In the case of fuel subsidies, the link is even more direct. Print lots of rupees, their value against the dollar will fall, and since oil and gas prices are dollar denominated, the price of such fuels will rise. And fuel subsidies are a key reason why the government is running such a fiscal deficit: the diesel subsidy (including the losses incurred by oil marketing companies and upstream assistance) alone is nearly equal to 20% of the government’s 2011-12 fiscal gap.

So its a circular trap: subsidies means government printing money, printing money jacks up prices, necessitating more subsidies.

Two, subsidies means less public services in another area. Government expenditure is a zero sum game. To pay for a subsidy, something else gets cut. The financial underrecoveries on petrol, diesel, kerosene and cooking gas in 2010-11 are little over one per cent of GDP. The combined expenditure of central and state governments on health is 1.27% of GDP. And as studies have shown it is poor health that is most likely to drag a marginal prson back into poverty: not the cost of cooking.

A more striking case has been how increased spending on agricultural subsidies has been matched by an equal cut in spending rural infrastructure. But the building rural roads and so on do much more to enrich the poor then any subsidy would.

Three, subsidies don’t go to the people they are supposed to. One there is theft and diversion. Estimates say 40% of subsidised kerosene in India is stolen. Diesel and cooking gas flood the neighbouring countries who sensibly don’t subsidise their systems. Cooking gas is so cheap it is diverted it to industrial use.

But the real sin of fuel subsidies in India is middle class capture. The poorest don’t use this stuff at all. India’s rural folk, who make up the bulk of the lowest quintile, barely use cooking gas cylinders. A TERI study put the figure at 9% of rural people use cylinders. The figure for their wealthier urban counterparts is 62%. Studies show within urban populations, it is not the poorest who benefit. The higher the income, the more likely the presence of a cylinder.

A similar development is happening in diesel with the growth of SUV fleets and diesel sedans.

Four, subsidies make people waste. It makes sense, if the stuff is cheap who will bother to conserve?

Forty % of rural people use kerosene for lighting. This is a very inefficient way to create light, but makes sense given the subsidised price.

All this makes it all the more absurd that the Indian government should be in crisis over fuel subsidies.

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  • Sumit Bose

    @ssraja, please get it clear, there is a very brutal episode involving your direct ancestor,who had to kiss the feet of maurading foriegners and to save his body being seperated from his head and having his wife and children from being sold into slavery, This “untouchability” myth is foisted upon us by the Congressi Marxist Historians, who have been drumming into us all that the “Muslims started COMING to India”. It lead V.S. Naipaul question: As if they were coming into India in tourist caravans!
    This brutal episode in not just what your hapless ancestor had to ingest with humiliation; it was something that millions of Indians had to endure. This is a terrible episode in india’s past that has been adroitly covered up by our Congressi marxists, and it was not something that the Mughals brought into India, it started way before with the scoundrels of the Slave dynasties. Emperor Akbar was the only one who brought in a genuine composite entity, when he took Raja Man Singh’s help to defeat Ahmad Shah Abdali ( who was a star in forced conversions). besides Akbar had rejected Islam. I would suggest you read M.A.Khan’s well researched book name “Islamic Jihad” to put to rest once and for all this red herring that “untouchability” is the prime motivator of so many muslims in India.


  • Anonymous

    SS Raja

    That is the trouble. Everyone claims I am the true Muslim and you are not, so I will kill you.


  • Anonymous

    Why should it be difficult to find real Muslims?

    Everyone claims I am the real Muslim and then seeks to chop the head of the other. Why should Shias be fignthing with Sunnis? or vice versa?

    I am a sceptical Muslim. I will now reveal above why Islam is in confrontation with other religions and with itself.


    ssraja Reply:

    mr parvez it is for domination(for khilafat) its politics not islam and they shia’s put islam in a different prospective as a religion which is not there is no place for worshiping objects of any kind in islam .even u can’t worship prophet(pubh) as god it is sin in islam .how can a human being r a star be god when the universe is so vast where just a galaxy has billions of stars .it takes100 light years to reach the nearest star.
    so don’t go into these kinds of arguments .if u want be a muslim(follower of islam) then just u choose the path of prophet(pubh) just follow sunnah nothing else.


  • ssraja

    yes zakir naik in present days he is a good scholar who has knowledge of other scriptures also .u r miss guided about islam .what i have said earlier that don’t look what others have done in the name of islam just do follow sunnah nothing else.
    there is propaganda about is islam is cruel to women in islam women r not treated as equal it is wrong. it respects women no other religion does.because the creator knows what product he has created so u n me don’t know. so don’t believe in false propaganda.Geert Wilders thinks polygamy is all part of 2009 Europe, thanks to Islam, without ever knowing whether polygamy is a man or a horse. polygamy — as one of Islam’s widely misread concepts has just been examined with a fine-toothed comb and put in perspective by India’s law commission, a government panel for legal reforms.
    To put the record straight, the law commission in its 227th report has said the popular view that Muslims could simply have two wives at a time was flawed. One of the authors of the report was Tahir Mahmood, a front-ranking legal expert on Muslim law, aside from the commission’s chairman AR Lakhsmanan.
    “It is generally believed that under Muslim law, a husband has an unfettered right to marry again even when his earlier (read present) marriage is continuing. On a closer examination of the relevant provisions of the Quran and other sources of Islamic law, this does not seem to be true,” the commission’s report states.
    These comments however were incidental to the main theme: “Preventing Bigamy via Conversion to Islam”. The legal experts were seized with cases of Hindu men using Islam as a licence to marry a second time without dissolving their existing marriage.
    Since Islam itself did not permit a licentious use of bigamy provisions, the commission suggested amendments to the Hindu Marriage Act to put a stop to Hindus misusing Islam’s highly conditional permission to have a second wife concomitantly with the first one.
    Islam is not what it is often made out to be and the real surprise is that realities are often ignored. You can pick several issues, like polygamy. There are more serious ones: if you kill enough non-Muslims you might even get to romp in a heavenly bedroom with 72 virgins. (I really doubt if God meant group sex! And even if He did, Islamophobes cringe at the very thought when Hugh Hefner’s Playboy Mansion has far more bedrooms with far sexier bunnies.)
    If I were to tell my wife that I care for second one now, I am not sure whether she will file for divorce. Eat me alive, she will for sure. Hell hath no fury like a woman scorned.
    Muslim countries themselves have clear laws that do not view polygamy approvingly; Tunisia and Turkey having banned it completely. In Egypt, if a woman can prove that her husband is married to another, he can be prosecuted for bigamy.
    Turkish family law and marriage legislation and regulations uphold monogamy. A second marriage cannot be executed unless the first is dissolved.
    In Syria, polygamy is highly regulated. A judge “may refuse permission for polygamous marriage unless husband establishes lawful cause and financial capacity”. Inability to conceive is one widely held ground for Islamic bigamous marriages. Click here.
    In Morocco too, polygamous marriages are discouraged. Polygamy may not be permitted if a woman fears unequal treatment, according to Moroccan family laws. Click here.
    In India, polygamous Muslim marriages are indeed few and far between. Old wives’ tales to the contrary, the National Survey Commission on the Status of Women in India (1975), one of the few surveys on polygamy in India, found that incidence of bigamy and polygamy was higher among Hindu tribals than Muslims.
    In the two decades between 1931 and 1951, the incidence of polygamy among Hindus and Muslims were comparable: 6.79% for Hindus and 7.29% for Muslims in 1931-41; and 7.15% for Hindus and 7.06% for Muslims in 1941-51. With access to education and its concomitant modern values, polygamy declined on the whole for all Indians, Hindus and Muslims. During 1951-61, 5.06% Hindus engaged in polygamy in contrast to 4.31% figure for Muslims.
    It is universally acknowledged that the Quran does permit polygamy. My stand is that the conditions it puts are designed to actually discourage polygamy.
    Four wives, that tempting luxury, are dealt with in Chapter 4 or Surah An-Nisa (Women) of the Quran, verse 3.
    Here’s Pickthal’s translation: “And if ye fear that ye will not deal fairly by the orphans, marry of the women, who seem good to you, two or three or four; and if ye fear that ye cannot do justice (to so many) then one (only) or (the captives) that your right hands possess. Thus it is more likely that ye will not do injustice.”
    It is common for theologians to explain it to madrassah students this way. God says ‘marry one, two or four’, you have to the freedom. But remember, you have to do equal justice to not just all of them, but also all your children, especially if they are orphaned. The verse then enjoins Muslims to restrict themselves to just one (wife) if they fear doing injustice.
    How long can we go on propagating the myth that Islam permits reckless freedom to marry four wives at a time?
    However, with those having pre-conceived notions, statistics don’t work. Prejudices do not melt away easily. Man finds it difficult to stomach anything that goes against his instincts.
    If a man is offered a fact which goes against his instincts, said Bertrand Russell, he will scrutinize it closely, and unless the evidence is overwhelming, he will refuse to believe it. “If, on the other hand, he is offered something which affords a reason for acting in accordance to his instincts, he will accept it even on the slightest evidence. The origin of myths is explained in this way.”
    Islam appears radical only when you “essentialize” it. Examples: polygamy it’s there in the Quran; beating women, it’s there in the Quran. So, Islam endorses both. But then the Prophet never ever beat a woman in his life.
    There are problems with the way Muslims have interpreted the Quran. There is a difference between religion and religious knowledge. Religion is divine, according to Muslim faith, but knowledge of Quran and how it is applied is not. Religious knowledge is human-developed. There is a need for non-Muslims and Muslims to shift from a literalist reading of the Quran to a liberatory one.
    I am saying there can be more than one way of reading the Quran and we need to re-read it. I am against treating the Quran as an absolute text. That betrays its very meaning. True, the texts don’t change. But the Contexts do.
    If you want an answer on whether I would criticize something I don’t like about Quran, then you have to understand the goalposts. There cannot be clinical answers to crises.
    Are we dealing with a crisis in Islam? Yes. Am I looking to please an audience? No. If I say I disagree with a certain line in the Quran, this may please a big section of the audience. This is not the purpose. People who believe in a faith don’t question God. Atheists do. The solution in my considered opinion is to re-read the Quran and privilege a liberatory reading over literalist reading.
    More and more Muslim countries have realized that what is applicable to religion may not be applicable to the state. Marriage is just one of them.