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6 May 2016 Editorial


6 MAY, 2016

Back home to Italy?

Legal delays caused by both India and Italy have kept the marines case on the burner. Now an international arbitration tribunal has ruled that Sergeant Salvatore Girone can return to Italy until it decides a dispute raised by Italy about India’s jurisdiction to try him and his colleague for the killing of two Indian fishermen in February 2012. Clarity on the legal status of the case has been elusive. Initially it was a question of whether Kerala had the jurisdiction to try them. In January 2013, the Supreme Court held that it was the Centre that had the jurisdiction. The National Investigation Agency took over the probe, but its insistence on invoking an anti-piracy law — the Suppression of Unlawful Acts against the Safety of Maritime Navigation and Fixed Platforms on Continental Shelf Act, 2002 — led to further delay, as Italy objected to the implication that its marines were ‘pirates’, as well as to the death penalty that the Act attracted. India dithered for months on whether to drop the provisions of the law. It was after being admonished by the Supreme Court over the delay that it decided to drop the charges under it. In 2015, Italy approached the International Tribunal for the Law of the Sea (ITLOS) and sued for provisional measures pending reference of its dispute to an arbitral tribunal. One such measure froze all progress in the case: both parties were asked to suspend all pending court proceedings. Italy’s action delayed matters further as the Supreme Court had already allowed the marines to raise the issue of jurisdiction during the trial, as well as the applicability of Article 100 of the UN Convention on the Law of the Sea, which says all states shall cooperate in the repression of piracy.

The order allowing Sergeant Girone to return may seem like a legal setback to India’s attempts to bring the two marines to justice. (The other marine, Massimiliano Latorre, is already back in Italy.) However, the order of the Arbitral Tribunal in the Permanent Court of Arbitration in The Hague has enough safeguards to ensure that Sergeant Girone will return to face trial in India in the event that it decides India has the jurisdiction to try him. Italy has given a solemn assurance to this effect. The question before the tribunal is crucial: whether India breached international law by asserting jurisdiction over the Italian oil tanker, Enrica Lexie, or whether Italy alone has exclusive jurisdiction. An unfortunate impression has been created that India’s legal and judicial system is under-equipped to handle such cases. The process should have been sustainable and credible from the beginning, instead of being marked by doubt and uncertainty. Nationalist sentiment and the constraints of domestic politics played an excessive role in influencing the manner the case was dealt with. India and Italy should cooperate, without further delay or diplomatic wrangling, in the interests of justice. The case must be settled on purely legal grounds, and without the kind of political one-upmanship that has contributed to the delay over the past four years.

Perverse consumer protection

Global crude oil prices slumped about 65 per cent in the 21 months from July 2014 through March 2016. In this period, the pump prices of both petrol and diesel dropped only about 15 per cent. The high imposition of Central and State duties and taxes has prevented retail fuel prices from moving in lock-step with the international trend in oil. This has helped shore up the government’s finances as it bets on public investment to spur the economy, even if this fiscal elbow room has been created at the consumer’s cost. However, Union Petroleum and Natural Gas Minister Dharmendra Pradhan has introduced a new line of thinking on this front, hinting that higher fuel taxation is a conscious ‘strategy’ to protect the people from the shock of paying more as and when crude oil trends reverse. When Atal Bihari Vajpayee’s NDA government had decided to end the Administered Pricing Mechanism (APM) with effect from April 1, 2002, the benefit that could accrue to consumers from market-based pricing was cited as a factor to justify the deregulation of the oil sector. The reasoning then was that dismantling the regime of price controls would open up the sector to increased investment, including from private players, and that with the ensuing competition consumers ultimately stood to gain. However, the past one-and-a-half decades have seen successive governments struggle to find the right balance in dealing with the twin challenges of reining in the subsidies on products — kerosene, LPG and diesel, the price of which was completely decontrolled in 2014 — and ensuring that fuel prices don’t face too much volatility.

While price volatility is a key concern when international crude prices are climbing, the NDA government has reaped a revenue windfall from the dramatic drop in the price of oil. This has been achieved by a combination of excise duty increases on automobile fuels and a parallel reduction in the subsidy bill. Here, the improved targeting of LPG subsidies via the Direct Benefit Transfer scheme and efforts to widen the voluntary surrender of the subsidy on cooking gas among the middle and affluent classes have both helped. While the desire to use the opportunity to address the fiscal deficit by shoring up revenue is tempting for any government, resorting to the use of any kind of indirect levers to impact fuel prices amounts to a backdoor APM. The Centre’s position that the easing headline inflation reflects the pass-through of lower oil prices doesn’t entirely stack up. While retail inflation as measured by the Consumer Price Index slowed to 4.83 per cent in March 2016, from 7.31 per cent in June 2014, food price inflation decelerated only to 5.21 per cent in March. That transportation costs are a significant factor in food prices and that lower diesel prices can help contain them is well established. The government’s paternalistic argument that it is refusing to pass on the direct benefit of softer global oil prices as a service to consumers does not bear scrutiny.

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