Thursday, 29th June, 2017

Austerity drive behind diesel price freeze

19, Jun 2012 By shashankagnihotri

In a recent interview, Presidential candidate and current Finance Minister, Mr. Pranab Mukherjee revealed that the UPA government’s austerity drive is the reason why diesel prices have not been hiked at the Central level. To curb costs of running the political and bureaucratic class, the UPA government has deliberately not hiked the price of diesel – the fuel of the national car – Ambassador.

An RTI filing to various Central Ministries revealed that there are 2000+ Isuzu engine powered Ambassador cars being used to ferry around the VIP MPs of the Central Government. The average daily running of these cars is a cool 180 kms a day.

Mrs. Sibal, wife of a certain minister exclaimed, “Please blame this on the mall culture. Once upon a time I could easily get my daily shopping done at the local Khan Market. But now, I have to travel all the way to Select City Walk of the DLF Emporio to do the same. Plus our children are also growing up. Now they need to go out at nights and socialize. We can’t avoid the daily travel.”

Renowned consultants, McKinsey and Co. were hired for Rs. 10 Crores by the Ministry of Finance to do an impact analysis of any potential hike in diesel prices in middle of 2011. After 6 gruelling months of data analysis, the consultants prepared a macro enabled excel based financial model to calculate the cost of running this fleet of Ambys. It concluded its study by finding out that a Rs. 2 increase in the diesel prices would set the exchequer back by a whopping Rs. 1 lakh a day.

The report was forwarded by the Ministry of Finance to the Prime Minister’s Office in April 2012. Consequently, in the next cabinet meeting the Prime Minister, Mr. Manmohan Singh took this difficult decision of not hiking the diesel prices as it could destabilize the ministries and in turn the economy.

Madam Sonia, on her part, has lauded this austerity drive. Faking News has learnt that this recommendation of Pranabda was key in catapulting him as the most prominent Presidential candidate. Supporting this move, and taking a strong step forward Ms Gandhi also declared that all vegetables to be cooked at 10 Janpath would be bought from nearby Sarojini Nagar market (instead of procuring them fresh everyday from the fields of Haryana)

(Editor’s note – The sensitivity of cost of procuring these vegetables from Sarojini Nagar market vs. buying them cheaper from distant fields has not been done in the financial model prepared by McKinsey. Reporters at Faking News have sourced this model and are working on building this additional scenario in it. Once they complete the exercise, readers would be apprised of the outcome.)

Government sources say that such drastic measures have become the need of the hour. An already burden government with high fiscal deficit cannot afford another rise in expenses Mr. Mukherjee however admitted that there is some merit in the proposal of hiking the excise duty on diesel cars. He said, “By hiking the excise duty on the diesel prices, the government will be able to kill two birds with one stone. On one hand it would silence the critics of the UPA government who say it only hikes petrol prices. On the other hand the increased duty paid by the various ministries would come back to the government in form of taxes!”

Meanwhile, status quo is being maintained by the government. McKinsey has been given Phase 2 of the assignment for evaluating the impact of an excise duty hike.

Hindustan Motors has refused to comment on charges of lobbying.