By K Raveendran
West Bengal chief minister and TMC supremo Mamata Banerjee may not have missed the mark when she predicted the other day that the Modi government might advance the next Lok Sabha elections. She even hinted at December this year. But for the China map issue, which is forcing itself into the national debate, thanks to a Rahul Gandhi, who apparently is never tired of raising the issue, all indications validate Mamata’s assessment.
The first endorsement for Mamata’s claim has been provided by the Rs 200 cut in the price of LPG cylinder, which the BJP attributes to Prime Minister Narendra Mod’s concern for the welfare of the vulnerable sections of society. Petroleum and Natural Gas Minister Hardeep Singh Puri has ruled out any politics in the decision, which, according to him, is a Raksha Bandhan gift to the country’s womenfolk.
Opposition has minced no words to call it a political gimmick. In fact, Mamata Banerjee attributes it as an impact of the emerging INDIA alliance, which by all indications is causing unquiet to the BJP camp, as the bloc remains a rather unknown quantity. The Mumbai session of the group is expected to come up with more concrete action with regard to how the opposition unity should play out in the elections.
Irrespective of the provocation for the LPG price cut, a most relevant factor is the state of the global petroleum market. High petroleum prices used to be a headache for the ruling dispensation at all election times, with the government and the oil companies getting into the collaboration play under which the companies would hold the prices until the elections get over, only to effect hikes immediately after the results are out, more than making up for the perceived losses.
But this time around, world petroleum prices are showing remarkable restraint, in spite of the arbitrary cuts announced by major producers to keep the market conditions tight by controlling supplies. Much to the discomfort of the cartel members, particularly the camp led by Saudi Arabia, crude oil prices continue to be in negative territory, trading at around $80 per barrel. Analysts are talking about the possibility of even further retraction towards the mid-seventies and they see many more impediments in any movement in the reverse direction, meaning the upside risk is limited.
According to those who are in the know of the Saudi financial situation and its relationship to the oil prices, the kingdom’s net foreign assets have dropped by up to $16 billion in July, marking the largest decline since the outbreak of Covid pandemic in 2020. This is attributed to the Saudi decision to cut crude production by one million barrels per day until September, in addition to its share as part of the OPEC+ alliance’s cuts that began in May. Reserves of net foreign assets have plummeted to their lowest levels since 2009, with Saudi Arabian Central Bank data indicating current reserves stand at $407 billion.
In view of the challenge, the Saudi authorities are making arrangements to absorb the shock to their financial situation by boosting other revenue resources. According to analysts familiar with the ways of the kingdom, the authorities are expected to put in place mechanism to boost the net foreign reserves. In September, after Saudi oil giant Aramco completes distribution of its performance-linked dividends, the situation is expected to show a marked improvement. The government-owned oil giant has announced a plan to distribute performance-linked dividends over six quarters, starting in Q3 2023. This is seen as a clear response to the overall financial challenges the country has faced due to plummeting oil prices this year.
The oil markets are well aware of the global economic concerns, including the situation with regard to the economic growth prospects of China. Also clouding the outlook is the potential increases in US interest rates, which could weaken demand for crude oil and the situation is unlikely to change in the short term, which would mean the time around the year-end. That would be an ideal time for Indian elections, as a major worry is off the table.
But one also has to take into account the political implications of the Chinese action in issuing a new map that includes Arunachal Pradesh and Aksai Chin as part of its territory. The issue is already snatched the focus away from Modi’s so-called gesture towards the vulnerable sections in announcing the cooking gas price cut. And with the INDIA alliance in no mood to waste the opportunity, the loss of territory to China is all set to add to the soaring political temperature, which should dampen the ruling party’s spirit for an early election. (IPA Service)
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