Subsidising the rich
by
AJ Philip |
Nation bears a health cost on diesel cars, besides much else
Last week, petroleum prices were revised marginally with petrol becoming cheaper and diesel dearer. Yet, there is a huge difference in the prices of these two fuels. In the national capital, where petroleum products are relatively cheaper, petrol costs $4.72 a gallon, against $2.76 for diesel. India meets most of its petroleum needs through imports, mostly from the Gulf.
Diesel is cheaper because the state subsidizes it. Without the subsidy, travel and transportation costs will go up, affecting the common man. A major consumer of diesel is the farmer, who uses diesel pumps for irrigation. A state like Punjab, called the wheat bowl of India, has exempted diesel from some taxes to benefit the farmer.
Thus, the diesel price has been kept artificially low to help the poor. But who are the real beneficiaries of the subsidy? Ironically, it is the rich and the super rich. A recent report said that Alto, the entry-level car from Maruti Udyog, India’s largest car manufacturer, sold fewer than Swift, the low-end diesel car from the same stable.
When Nano, the world’s cheapest car, was launched, it was expected to catch the imagination of the price-conscious Indian. Far from that, the Tata Group, which proved sceptics wrong by producing a car for less than $2500, found those who booked the car in advance cancelling their bookings. To boost its sales, the company is now planning a diesel version of Nano.
Once it hits the showroom, Nano is bound to become popular. The trend is indeed very clear. The Indian car industry has been undergoing a metamorphosis. Less than two decades ago, diesel cars constituted only 10 per cent of the cars manufactured in India. But in 2011-12, diesel cars accounted for 60 per cent.
The average Indian did not prefer a diesel car, because its engine was noisy and more expensive to maintain. Over the years, diesel engines were improved to give trouble-free service for longer periods of time. A recent study by the Centre for Science and Environment (CSE) found that the car buyer now has a greater variety of diesel cars to choose from than petrol ones.
At this rate, the percentage of diesel cars will increase from the present 60 to 90 in a few years. Another interesting finding of the study was that the buyers are increasingly opting for bigger and more powerful cars like sports utility vehicles (SUVs).
Owners of these cars are the ones who really benefit from the subsidy on diesel. Come to think of it, India’s richest man, Mukesh Ambani, is heavily subsidized by the Indian state every time his fleet of diesel-guzzling Rolls Royces and BMWs are sent to the gas station for filling.
It is true that diesel cars fetch the government a higher excise duty. But what is overlooked is the subsidy on diesel. In the end, the government has to willy-nilly subsidize the running cost of the car. One suggestion to overcome this anomaly is to introduce a substantial one-time extra excise duty on diesel cars to recoup in advance what the government would be subsidizing over the years.
The car industry has been resisting the move on the ground that diesel consumption by cars is negligible, compared to the diesel consumed by industry, public transport etc. It knows only too well that if such a tax is levied, it will offset the economic advantage of a diesel car, at least for the middle class.
What has made the case for such a disincentive even stronger is the finding of a recent study by the International Research Agency on Cancer (IRAC), an affiliate of the World Health Organisation (WHO), that diesel fumes are carcogenic like asbestos, arsenic, cigarettes and mustard gas. What’s more, the researchers were unanimous in reaching this conclusion. This means the nation has to pay a health cost for the popularity of diesel as a vehicle fuel.
With metropolitan cities like Delhi, Mumbai, Kolkata and Chennai becoming chock-a-block with cars, run on diesel, the people would be exposed to greater risks of cancer. It was with great difficulty that owners of public transport in Delhi - taxis, buses and auto-rickshaws - were forced to shift from petrol to compressed natural gas (CNG)-run vehicles, when vehicle pollution reached dangerous levels in the capital.
The surge in diesel cars and the resultant fumes will increase pollution and Delhi will be back to square one. All this should strengthen the need to withdraw the subsidy on diesel, exploited by the car manufacturers and benefited by the affluent sections of society.
Oman Tribune |
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