[Reader-list] Petrol prices

[Patrice Riemens]

Ahem.... once upon a time in South Delhi, I rode on the pillion of a
bicycle pedalled by a crazy Dutch co-student (he rode as if we were in
Holland, where motorists pay up big time if they only touch a bike) and
my, I thought I'd die. Happilly honking trucks on the verge of 'turning
turtle', dashing ambies and premiers, mad-maxed sikhs on their Harleys
reconfigured as collective taxis... You guessed, the year was 1980.



> Hard to imagine today, but between 1994-98 I rode a bicycle on Delhi's
> roads.  It was lovely.  In the early years there wasn't much traffic and I
> went everywhere on the bike, in summer and in winter: shopping, seminars,
> films, to the Qutb Minar to do watercolours and once, even to DLF for
> lunch.
> Had to give up in 1998 when I started breaking out in hives and even
> popping
> 2 antihistamines at night wouldn't stop the itching.  One wise Tibetan
> doctor attributed it to the condition of my lungs and the pollution
> affecting it.  I had little choice but to get myself a car.
>
> What I wish for is this: that the government stop subsidisng petrol, that
> people stop buying cars and say nono to the nano, that pollution levels
> drop
> to what they were in the early '90s, and that I'm back on my dark blue
> 'Hero' with the drop handle bars.
>
> If wishes were bicycles...
>
>
> On 2/19/08 3:08 PM, "Rana Dasgupta" <rana at ranadasgupta.com> wrote:
>
>> thanks for this.  this is exactly what i think when people complain
>> about the cost of petrol.  it should be much more!
>>
>> R
>>
>>
>> S. Jabbar wrote:
>>> Worried about rising fuel costs? Here¹s an interesting piece that was
>>> published in the Indian Express a couple of days ago. Hope this will
>>> make
>>> people think twice before joining the ranks of the whiners.
>>> Best
>>> Sonia Jabbar
>>>
>>>
>>> Perverse Subsidy for the Rich
>>> By Atanu Dey
>>>
>>> Nobel prize-winning economist Douglass North observed that ³economic
>>> history
>>> is overwhelmingly a story of economies that failed to produce a set of
>>> economic rules of the game (with enforcement) that induce sustained
>>> economic
>>> growth.² Producing a set of rational economic rules is a political
>>> rather
>>> than an economic process. Frequently basic economic truths are
>>> willfully
>>> disregarded in a myopic but cynically calculated process of short-term
>>> electoral gains. In the long run, however, the persistent practice of
>>> politically motivated economically unsound policies has the
>>> unsurprising and
>>> unfortunate effect of impoverishing the economy.
>>>
>>> India is a case in point. Despite being endowed with substantial human
>>> and
>>> natural resources, it has failed to provide a vast majority of its
>>> citizens
>>> the basic necessities for a decent life. It is hard to avoid the
>>> conclusion
>>> that what India mainly lacks is a rational set of economic rules. An
>>> important contemporary example of a flawed economic policy is the
>>> subsidy
>>> that the consumers of petroleum enjoy.
>>>
>>> The price of a barrel of crude is hovering around US$ 100 a barrel and
>>> yet
>>> the price of petrol at the pump remains essentially what it was when
>>> crude
>>> was selling at half that price about a year ago. The resultant gap
>>> between
>>> the cost and the price has to be bridged through a subsidy that is
>>> estimated
>>> to be around Rs 70,000 crores this year. The case is made that by
>>> keeping
>>> the price artificially low, the so-called ³common man² benefits. But
>>> that is
>>> certainly not the case. It is a perverse and regressive subsidy for a
>>> number
>>> of reasons.
>>>
>>> First, it is the ³uncommon man² who actually benefits directly from
>>> the
>>> subsidy. In fact, the wealthier you are, the more vehicles you own, the
>>> more
>>> subsidy you capture. For every litre of petrol or diesel you consume,
>>> you
>>> benefit by around Rs 10; for every cylinder of LPG, someone else chips
>>> in Rs
>>> 250. The really poor person does not own cars nor has a gas connection.
>>>
>>> Second, when distorted low prices do not reflect the full costs, it
>>> sends
>>> the wrong signals and consumption is more than is socially optimal.
>>> India
>>> meets about three-quarters of its petroleum needs through imports at an
>>> approximate cost of US$ 50 billion a year. Increased consumption
>>> inflates
>>> that import bill and is economically wasteful.
>>>
>>> Third, the burden of the opportunity cost of the subsidy falls squarely
>>> on
>>> the people who cannot reap its benefits. The resources that the subsidy
>>> consumes are not available for services that the poor benefit from such
>>> as
>>> subsidies for public transportation systems, primary health and
>>> education.
>>>
>>> Fourth, the subsidy is financed by bonds issued to oil marketing
>>> companies.
>>> These bonds represent a future liability. Essentially it is a mechanism
>>> employed by the present voting generation to secure benefits that will
>>> be
>>> paid for by the future generations who do not have a vote and therefore
>>> do
>>> not have the option to reject that burden.
>>>
>>> Fifth, if prices were more aligned to true costs, alternatives such as
>>> better public transportation system can have a fair shot at being
>>> developed.
>>> It would also send the right signals for more conservative use of
>>> private
>>> cars, leading to less congestion and pollution.
>>>
>>> The basic economic truth is that there is really no such thing as a
>>> free
>>> lunch. Today¹s subsidy comes at a cost that will only grow larger the
>>> longer
>>> the delay in pricing petroleum products at full cost. It is fairly
>>> simple to
>>> remedy the situation. Raising the price at the pump is the simplest but
>>> the
>>> most politically risky. The UPA government knows that and will
>>> definitely
>>> not risk losing power even if raising prices is for the larger benefit
>>> of
>>> the economy.
>>>
>>> But those subsidies have to be reduced, if not totally abolished
>>> overnight.
>>> A start could be made immediately to reduce the subsidy to the rich
>>> while
>>> continuing it for the poor. A mechanism for doing so would be to impose
>>> a
>>> tax on car owners which would reflect the full cost of the petrol they
>>> use.
>>> Depending on the size of the engine and average fuel consumption, an
>>> annual
>>> fee could be assessed which has be paid to maintain registration. So if
>>> a
>>> particular make and model of car typically consumes, say, 1,000 litres
>>> of
>>> petrol a year, the tax could be Rs 10,000.
>>>
>>> This type of a mechanism would leave all two-wheelers, three-wheelers,
>>> and
>>> buses untouched. Since it is usually the common man who uses public
>>> transportation, the common man would continue to enjoy the subsidy.
>>>
>>> Implementing rational economic policy is not impossible for India even
>>> though for decades on end we have been burdened with flawed policies.
>>> We are
>>> moving slowly towards a more rational way of running an economy.
>>> Whether we
>>> persist on along that path is a political matter which can only be
>>> determined ultimately by the enlightened self-interest of an educated
>>> population.
>>>
>>> For more see Atanu Dey¹s blog: deesha.org
>>>
>>> _________________________________________
>>> reader-list: an open discussion list on media and the city.
>>> Critiques & Collaborations
>>> To subscribe: send an email to reader-list-request at sarai.net with
>>> subscribe
>>> in the subject header.
>>> To unsubscribe: https://mail.sarai.net/mailman/listinfo/reader-list
>>> List archive: &lt;https://mail.sarai.net/pipermail/reader-list/>
>
>
> _________________________________________
> reader-list: an open discussion list on media and the city.
> Critiques & Collaborations
> To subscribe: send an email to reader-list-request at sarai.net with
> subscribe in the subject header.
> To unsubscribe: https://mail.sarai.net/mailman/listinfo/reader-list
> List archive: &lt;https://mail.sarai.net/pipermail/reader-list/>
>
>