Sunday, February 13, 2011

Pricing of Petroleum Products

Diesel Pricing Policy

It is nearly one year, since the Expert Group submitted its report on "Pricing of Petroleum Products" and the Dual-Pricing policy of Fuel is reported to be under consideration of the Ministry of Petroleum and Natural Gas for about two years. An early decision is required, considering the following:

a)Though the subsidy on Diesel is basically meant for Agriculture, Goods Transport and Public Transport sectors, more than 30% of total diesel consumption is reported to be misused by Industry, captive Power Generators and Passenger Cars.

b) It may not be possible to adopt market determined Diesel Prices in the near future and it is difficult to ask gas stations to charge Diesel Car users, who do not deserve subsidized diesel, higher than other vehicles.

c)Therefore suggest that 10 to 15 % cess on the sale price may be imposed on diesel Cars, SUVs etc, in addition to corresponding increase in life-tax imposed by the respective State Governments, so as to compensate for the subsidized diesel used in life-time of Diesel Cars/SUVs, as part of dual fuel pricing policy.

d) The bulk users other than Railways and State Transport Corporations be charged market determined Diesel Prices, as part of a dual fuel pricing policy.

e)The Goods Transport by Road be discouraged gradually, by making Diesel expensive to the extent possible and to encourage goods transport by energy efficient and eco-friendly Railway Network, which needs to be encouraged by allocation of adequate funds from Five Year Plans, instead of Road Network.

f) The subsidy is being misused, by diverting the cheap subsidized Diesel as the substitute for Furnace oil and the Kerosene for adulteration of other fuels.

g)The subsidy burden on Kerosene for lighting purposes, can be eliminated, apart from avoiding health hazards / risks of Kerosene, by supplying stand alone Solar powered LED Lanterns with back up of Lithium Ion battery, having a life span of at least 5 years, for a cluster of households through MNRE

Decouple Supply and Consumption

Both Energy and Economic Policy must share a least-cost, resource-efficient emphasis. The current subsidized, supply-side focus exacerbates the causes of energy waste. And energy waste bleeds the economy. The wise Energy Policy creates both a healthier Economy and a healthier Environment.


Civil Aviation Sector to get Boost at What Cost?


This has reference to the reported statement of Hon'ble Prime Minister, while inaugurating the new Terminal of Thiruvanathapuram International Airport, emphasizing the importance of the civil aviation sector to the Indian Economy. No doubt it is important for development of international trade, tourism etc for integration with Global Economy.

National Action Plan for Climate Change (NAPCC)

In order to respond effectively to the challenges of Climate Change, the Government of India formulated National Action Plan for Climate Change (NAPCC), under the guidance of Prime Minister's Advisory Council on Climate change. One of the guiding principles of NAPCC is for protecting the poor and vulnerable sections of society, through an inclusive and sustainable development strategy, sensitive to Climate Change.


Aviation Sector- Climate Change- Rogue Sector 

The NAPCC does not talk of Aviation sector, even though it is reported to be a "Rogue Sector" and its environmental impact is out of control. The CO2 emissions from international aviation contributing to "Global Warming", is reported to have gone up considerably since 1990 and it is projected that emissions will be more than doubled by 2025. In terms of damage to the climate, Flying is 10 times worse than taking the Train. 

The domestic Air-traffic in the country is reported to have tripled during the last 7 years and the Prime Minister added that an exponential growth in air passenger traffic is expected in this decade. It is to be seen how many of them will be from the poor and vulnerable sections of society?


Transportation Sector


 As per NAPCC document, the Planning Commission estimates indicate an energy saving potential of 115 MTOE (million tones of oil equivalent) in the year 2031/32, by increasing the share of Railways and improving efficiencies of different modes of Transport. TERI estimates, indicate an energy saving of 144 MTOE in 2031, by including efficiency improvement across all modes, as well as considering enhanced use of Public Transport and Rail-based movement, as compared to business-as-usual trends. The corresponding CO2 emissions reduction is estimated at 433 million tones in 2031.


 It is also stated that the Policy and Technology measures, can lead to significant energy savings and thereby emission reductions, in the transportation Sector and some of the measures suggested are:


a)   Promoting attractiveness of Rail-based movement, relative to long-distance Road- based and short-distance Air-based movements

b)    Establishing mechanisms to promote investments in development of high-capacity (Rail-based) public transport systems (equity participation etc)

c)    Appropriate Transport Pricing, Taxes & Charges to influence travel demand, choice of Transportation mode and, the purchase & use of
     vehicles, in respect of fuel choice  & efficiency, thereby suppressing fuel demand and reducing GHG emissions.


Adverse Impact of Government Aviation Policy 

 The Climate Change is the most urgent challenge facing the humanity and the Aviation Policy of the Central & State Governments, is doing the opposite of what is required, by catering to insatiable demands of Aviation Sector, by way of more Airports, Runways, Terminals. etc. in the name of rapid economic development.

The subsidies and liberal concessions offered to Aviation Sector by taxpayers' money, disproportionately favours the economically better off, as those of lower incomes fly infrequently. This goes against the very guiding principle of NAPCC, for protecting the poor and vulnerable sections of society, through an inclusive and sustainable development strategy, sensitive to Climate Change.


Alternatives to Aviation

 It is of utmost importance and urgency to curtail emissions by restricting the capacity of aviation sector- short-haul routs in particular- without hampering the economic development.  Some of the suggestions for consideration are:

a)    Wider access to and the use of electronic communication devices such as interactive videoconferencing can be made more attractive to obviate expensive business air travel and restricting its use.

b)    The augmentation, expansion, modernization and improvement of the Railway Network, should get higher priority than Airports, which need thousands of acres of land and higher capital investments, that too catering for upper strata of the society. This obviates proliferation of CO2 intensive Short-Haul Air Routes.

c)    To opt for fast and attractive Inter-City Rail Transport, much more energy efficient than Road or Air transport, apart from being comparatively Cheaper & Safer.