09-Feb-2012

Gordian Knot of Petrol/Diesel Subsidies


It is high time that people, who can afford to buy cars and two-wheelers, realise that fuel won't come in cheap. None of them complains when they have to pay for expensive airline or movie tickets. Is petrol such a measly commodity that it has to be sold cheap? There is just no alternative unless state governments decide to do away with sales tax on petrol, clearly an inconceivable option from the viewpoint of revenue generation. Dealing with diesel pricing won't be as straightforward, since it is used in the commercial vehicle segment which carries food products across the country. Higher operating costs will do little to curtail inflation, and diesel prices just cannot be tinkered with, at least for now.
Yet, it is only logical that users of cars and SUVs pay the market price for the fuel. The auto industry believes this is a better alternative to taxing diesel vehicles. Now, how does one ensure that diesel-driven cars are charged higher at retail outlets while vans and trucks pay less? Certainly not the easiest of tasks, especially in a system where cross-subsidies only spawn fuel adulteration. Clearly, finding a solution to this huge mess is almost impossible. There have been any number of expert committees which have come up with suggestions, but the reality at the ground level is something quite different. Till then, sleepless nights are only inevitable for the Government and the entire oil sector.
The auto industry is entirely based on fuel subsidies, hence they would not like the government to further tax diesel vehicles.  They are all shifting to making diesel vehicles since they see people opting for those.  But I don't understand why it is difficult to tax diesel-driven cars at a higher rate without penalising commercial diesel vehicles.  Surely there should be some way of differentiating between car and truck sales?

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