I think it was around two years ago when a colleague of mine announced that he was buying an air ticket to Trivandrum. "Holiday or family?" I asked. "Come to think of it, neither really," he said. So, why the trip, I asked. Well, he said, the Mumbai-Trivandrum ticket was going for Rs 900 and hailing from Kolkata, as he did, he had never visited Kerala. "At Rs 900, it's a steal," he said.
This colleague was not alone. Many friends too were buying tickets for destinations they had no specific plans for going, except that the tickets were cheap and that became the trigger in itself. I could think of several occasions when I have been tempted to head for a nice, exotic-sounding locale purely because an internet search (and a lot of that was happening) threw up some good fares.
No longer. Anecdotally, I can say that hardly anyone I know is visiting the travel websites, at least to find the best fares. Not that the airlines are offering too many deals any more. Statistically, the numbers are telling.
The first quarter of 2008 saw India's air passenger growth at 11 per cent compared to nearly 28 per cent for the first quarter of 2007. If you were to pick any airport, let's say Mumbai, traffic growth has dropped to single digit from double digits and forecasts are that it will fall further.
So, the rising price of crude is already telling on air traffic consumption, as airlines are unable to hold on to rising fuel costs. In a way that's good news because consumers are forced to reckon with the real prices of their air tickets as opposed to those which are a product of extreme competition or general start-up adventurism.
The same cannot be said for the overall consumption of oil products in India, which seems to be displaying amazing inelasticity. One reason is that petrol, for instance, has barely gone up 4 per cent in the period when overall crude prices have gone up anywhere between 80 and 90 per cent.
Which means that consumers are not, as we are all only too well aware, reckoning with real fuel prices, particularly when it comes to using cars and two-wheelers.
There is a fiscal argument to this as there are some fiscal solutions as well. Let me focus on the demand side. I was speaking with Crisil Principal Economist D K Joshi on the subject. According to him, we must be the only country apart from China where consumption has not only not reduced but continues to rise. "If you look at countries in and regions like Europe and North America, there is enough evidence to show that terms of barrels per unit of GDP, consumption has reduced," he says.
The emotional response to this is that countries like the US have long enjoyed plentiful consumption (as they continue to do) and should now allow us the privilege of burning more fossil fuels. Particularly if we can afford it. Of course we can't as all the economists are saying -- the real price of petrol is perhaps Rs 100 a litre.
But let me not get fiscal here. As I see it, some of the emphasis clearly needs to swing to consumption and conservation, for the short and long term, for financial and environmental reasons. As it stands, there is little or no initiative on that front.
Possibly the government does want to be seen to be (except on the odd occasion) discouraging consumption. But the lack of any strong statements on that front are also a little discouraging, if not worrying. Between the ministers of finance, petroleum and natural gas, and perhaps science, there has barely emerged a suggestion on cutting back on fuel consumption.
The prime minister has addressed the issue of oil prices by saying the oil companies would be protected as would be the common man. But why not focus on consumption as a virtue, I wonder.
It strikes me that we had more active propaganda by Government bodies like the Petroleum Conservation Research Association when oil was at $32 a barrel than it is $132 a barrel!
The PCRA in its corporate statement refers to the oil crisis of the 1970s as the crisis that triggered the need to focus on conservation. Indeed, what then are we grappling with today? Incidentally, this is to make a point and not target an organisation which is at least trying to do something.
To conclude, the populace at large is not ready to understand that oil is a scarce commodity. The government needs to tell the populace that it is and a pretty exhaustible one at that.
Moreover, the government needs to use the propaganda machine to take this issue head on and not wait for some magic wand to appear. It may, but not in a hurry.
Crisil's Joshi tells me that prices have to be raised because the price signal is critical. And of course it will help the government's books too. But more than the fiscal measure, he argues that a strong message needs to be sent out to all on conservation and a shift to alternative fuels. "If the whole world is beginning to recognise this, why not us?" he asks.
The PCRA incidentally organises oil and gas conservation fortnights. What we are in dire need of is a oil and gas conservation year. Else we are in trouble.
