PM makes it clear, govt will not splurge on diesel-guzzling SUVs

Prime Minister Manmohan Singh is resolute on not rolling back the diesel price hike . The economist Prime Minister has made it clear that the government will not 'splurge' on diesel-guzzling SUVs when the country's fiscal deficit is soaring.

Figures from the transport sector make it evident that Manmohan's 'dieselonomics' is aimed at preventing the rich SUV owners from enjoying the subsidies meant for the poor people.



The SUVs constitute 34 per cent of the diesel car sales annually. About 61 diesel car models being sold in India are in the category of 2000cc and above engines. Sales of these cars have registered 41 per cent growth during 2010-11. Subsidised diesel prices have protected and cushioned the SUV segment buyers on the fuel front and added to the financial load on the government.

"For the first time in 15 years, the country's diesel consumption has overtaken that of petrol. The nation's fancy for diesel-run cars saw that portion of the sector jump from just four per cent of new car sales in 2000 to a whopping 60 per cent today," said a report of the Petroleum Planning and Analysis Cell of the ministry of petroleum and natural gas.

"Cars now guzzle about 15 per cent of the diesel share in the total transport sector... Diesel registered 6.4 per cent growth rate compared to petrol (4.5 per cent)," said the report, adding that "in the more popular compact car models, the share is as high as 70-75 per cent."

Senior officials in the Prime Minister's Office (PMO) said the government is feeling the pinch of fuel subsidy - about Rs 1,40,000 crore on petrol products - which is more than the combined annual subsidy on education and health sector. It will end up paying about Rs 2,00,000 crore as subsidies if fuel price hike is not imposed.

"Are we ready to bear the fuel subsidy load in the name of public transport usage?" asked a senior officer in the PMO adding, "if the country can bear the cost, better give it free. But don't overlook the rise in the number of private cars in the diesel consumption segment."

The Prime Minister's stand is backed by transport experts who feel diesel users in the private cars segment should be taxed for the use of the fuel. "Not raising diesel prices is no longer an option. Uncontrolled under recovery will further increase fiscal deficit, enhance money supply, stoke inflation and interest rates, negatively affect investments and lower GDP. New studies are showing inflation rates will be much higher if nothing is done about reducing under recovery on account of diesel.

This will affect the common people more," said Anumita Roychowdhury, executive director, Centre for Science and Environment (CSE).

When asked why the government cannot introduce a higher fuel price only for diesel cars and SUVs, Roychowdhury said though the proposal is under consideration it won't be feasible at the moment as dual pricing requires stricter implementation.

"How will you ensure that the SUVs' owners are buying the higher-price fuel and not the one meant for other modes of transport?" she asked. The petroleum ministry's report states that "each litre of petrol replaced by diesel in cars pushes the excise revenue loss by seven times. "The amount of excise a two-wheeler owner pays on a litre of petrol is significantly higher than what an SUV owner pays on a litre of diesel. How can the government justify these concessions to the car and SUV owners?

Even as the growth rate of diesel cars has overtaken petrol vehicles, the excise earnings from both have nearly equalled despite the fact that petrol pays seven times more excise than diesel,'' the report said.

Kirit Parikh, former member, Planning Commission, saw a need for tax equalisation between diesel and petrol cars. "Additional tax on diesel car helps to recover the additional tax that petrol cars pay because of higher taxes on petrol fuel. Impose higher taxes on bigger engines," Parikh recommended in his report on diesel to the finance ministry.

Leaders from Opposition parties refused to buy the argument. "The government has computerised data of everyone's income, land and assets. They can easily find out who is using diesel-consuming gadgets like tractors, generators and SUVs. Such people should be taxed the (price) differential between petrol and diesel. This way, the prices won't go up and the farmers won't be affected," said Sharad Yadav, president, JD(U).

Shahnawaz Hussain of BJP said: "Diesel is not just used for SUVs. It is used by farmers in the irrigation system and by people in rural areas. A hike in prices will have a serious effect on them."

Courtesy: Mail Today