The government was dragging its feet for long on the subject of freeing diesel pricing and eliminating subsidies but when it did act last week, it got its policy all wrong. Oil companies have been given the freedom to charge market price for diesel supplied to bulk consumers such as the railways and state transport corporations while prices at the pump level will move up marginally. Retail prices will eventually catch up with the market, assuming that the oil companies raise prices at regular intervals. Market pricing for bulk consumers may prune the subsidy bill of the government significantly but it is a perverse policy because those who deserve the subsidy — the poor and lower classes who use public transport — will now be forced to part with more money for their daily commute or travel. State transport corporations will have no option but to pass on the higher fuel costs to their passengers given their already fragile financial state and the inability of fiscally-strapped State governments to reduce excise; the Railways have already increased fares and train tickets will anyway cost more from today. The perversity of the government’s decision will be evident if one considers that those who drive passenger cars — including high-end SUVs — that run on diesel engines will continue to enjoy the subsidy and pay at least Rs 10 a litre less than the bulk consumers. At the best of times, this is not a segment that deserves to be subsidised by the government. But for rich motorists to benefit when poor commuters are penalised upends all notions of equity.
The government seems to have gone for a politically expedient and administratively simple solution as opposed to other, more contentious but equitable options to reduce its subsidy burden and keep its own finances in shape. A cess or higher excise duty on diesel cars and SUVs that guzzle up subsidised fuel would have addressed the twin issues of reducing the fiscal burden of subsiding diesel while also eliminating the economic rent derived by passenger car manufacturers who price diesel vehicles at a high premium to petrol ones. This rent is a direct product of the higher demand for diesel cars compared to petrol due to the large price difference between the two fuels. Alternatively, the government could have seriously examined the feasibility of introducing dual pricing whereby trucks and cars can be charged differently with the former alone enjoying the subsidised price. The final option, of course, would have been to free prices across the board with only the Railways and state transport corporations allowed supplies at a subsidised price. Such a move would have ensured equity by ensuring that those who use public transport are protected while private, individual transport is made to pay the market price.
Keywords: diesel pricing, Retail prices, Market pricing, diesel price hike, fuel price hike, de-regulation of diesel, OMCs
The article enlightened the readers about withdrawal of subsidy to the
bulk consumers i.e. railways and public transport agencies, which will
affect the common commuters a lot. the general public were of opinion
that the withdrawal of subsidy to bulk consumers will not be affect the
common people.
embarking a dual pricing policy will advent some newer forms of
corruption that will exacerbate the present woes. Bulk consumers such as
railways must get the diesel at subsidised rates as they are the
transports of poor and middle classes.
Although, i appreciate the author for bringing to notice the difference in price policy for bulk and retail consumers, the rest of ideas given by the author seem quite wrong.
increasing the tax on diesel cars would shrink the already struggling manufacturing sector further. The growth rate of the sector has already shrunk from about 6.6% to 0.1%.
putting in place a dual price policy is laughable. It would only lead to black-marketing of the subsidized fuel. All drivers need to do is to fill up their tanks and sell that diesel outside.
What the government needs to do is to deregulate the diesel prices completely and let the market take its own course.
Linking with international prices is the simplest method. Conservation of petroleum can
Happen only if the price is increased if international prices go up. Country like our which
Import 70 percent of crude oil, oil conservation and alternate energy sources are critical
Government's allowing oil companies to increase price of diesel to bulk purchasers at market price as also to retail consumers in phases is nothing but a clever action stealthily done to increase financial burden on common people. You have rightly pointed out the anomaly: while concession has been given to the high-end car owners and the rich passenger car transporters, more money is being extracted from the pockets of the commoners who use public transport. Though the suggestion of taxing more by way of levying higher cess or higher excise duty on diesel cars and diesel SUVs still seem to be not escaping the cascading effect on common man, your proposal of introducing dual pricing measure on trucks and cars, with the former being adequately subsidized, is a more realistic proposal on the line of progressive taxation in case of individual taxpayers. In fact, one must agree that a deficit economy like ours can hardly bring equity overnight so far as subsidy politics is concerned.
Expecting a fair solution from a party like congress is like day dreaming.Ruled and driven by a bunch of sycophant and valued by all the adversaries of the state this move is sure to garner sufficient fund in order to face the election.The way suggested in the editorial are very simplistic and efficient and everybody in government is very well informed of, but at the same time they also know that not only they need lobbying(corporate) but also need huge funding to woe the voters.Direct cash transfer and than a way to pull back whatever given to them indirectly.it will take many years (yet to tolerate)to understand the underlying philosophy ......Hats off congress u decide u rule u blame u vindicate its every where U.
Dual pricing? That too between trucks and cars? Lol, that would be
like having to build a separate pump at each fuel station for
trucks. Even if that is feasible, there would be no practical way
to ensure that cars and SUVs don't use them
Regret Government is hiding and feeling shy to convince rich tp pay more
and is comfortably forcing the poor who is already bearing the burden of
indirect taxes to pay more ! Bad business strategy by Government of
India and unfair for poor in India as in Zimbabwe.
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