(The following article is from the July 1-31, 2008, issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $25/year, or $12 low income rate; for U.S. readers - $25 US per year; other overseas readers - $25 US or $35 CDN per year. Send to: People's Voice, c/o PV Business Manager, 133 Herkimer St., Unit 502, Hamilton, ON, L8P 2H3.)

By B. Prasant, PV correspondent in India

Two critical issues - the unpopular agreement for India-US nuclear cooperation, and the crisis of rising prices - may compel India's Congress-led United Progressive Alliance (UPA) central government of Prime Minister Manmohan Singh to hold elections earlier than previously expected.

     The Communist Party of India (Marxist), the largest left party, has warned PM Singh that the government must fight rising double‑digit inflation. Singh and his fellow World Bank trained finance minister P. Chidambaram have backed drastic increases in the prices of petrol diesel, and even for the humble cooking gas.

     The profits enjoyed by private oil companies in the country have increased along with oil prices. Due to the selective policy of the Government, private sector companies, both in upstream and downstream, are enjoying windfall profits not due to extra business acumen, but due to the high global crude price.

     With crude oil now exceeding $130 per barrel, the CPI(M) wants windfall gains to be recovered from all the private and joint venture companies like M/s Cairns, Reliance, Essar and others extracting oil and gas in India. When these contractors participated in the New Exploration Licensing Policy (NELP), none envisaged crude oil prices beyond $30 per barrel. Now, upstream contractors gain an additional $70‑$80 per barrel without any extra work. Many other countries have re‑negotiated such contracts with a threat of imposing windfall profit taxes, but not yet the government of India.

     Similarly, private sector refineries have been allowed to keep margins for refining cost exceeding $15 per barrel, while public sector companies struggle to meet their financial requirements. For a private refinery like Reliance, which exports a major portion of its products, the profit has increased by 26 per cent during the quarter October‑December 2007 and 35 per cent during January‑March 2008 over the same period of the previous year.

     The government has dragged down the public sector companies while private sector companies have been allowed to flourish, since private refineries do not contribute to meet the oil subsidy bill.

     In 1980 in the United States, federal legislation levied a windfall profits tax on oil companies as a result of the sharp increase in oil prices. The tax was ended in 1988 by President Reagan, and has not been re‑enacted. However, with oil prices reaching record levels there is renewed pressure to bring back the tax. On May 7, a Democratic Senator introduced "The Consumer‑First Energy Act of 2008", which would create a "windfall profits tax" on the major oil companies.

     But in India, the UPA government allows the private oil companies to make windfall profits, at the same time increasing the prices of petrol and diesel, burdening the people who already suffer from a steep price rise of essential commodities.

     A windfall profits tax, along with the reduction of customs duty on crude oil and reduction in excise duty of petroleum products without any ad valorem content, should help to meet the situation arising out of the steep rise in world oil prices and providing relief to the oil marketing companies.

     The CPI(M) and the Left parties have also called for stepping up the ongoing nationwide mass agitation against both the threatened nuclear deal, and uncontrolled inflation. CPI(M) general secretary Prakash Karat recently commented that if the Left demands were ignored, they would have to consider a break with the federal government.

     One constituent of the United Progressive Alliance, the Bahujan Samaj Party that represents the dalits and is in office in the largest of India's provinces, Uttar Pradesh, has already withdrawn support from the UPA. Other UPA partners might well follow suit, as the Congress party considers bringing the next parliamentary elections forward by five months, to November 2008.