Fuel Price Imbroglio - 2

What are the solutions to the fuel pricing problem? There are two aspects to this - managing the demand and finding ways to pay for the imports. Let us look at demand side scenario first.

There has been lot of clamour for holding the price line, adjusting the cutoms and excise duty or revising the Sales tax to make Petrol and Diesel cheaper. What proponents of these measures dont understand is that by doing so, we are not curtailing demand. In fact we will be encouraging people to spend more of fuel, which is the last thing the nation wants. Fundamentals of economics tells us that as price goes up, demand comes down and vice versa.

The second argument is that increase in price of Diesel will lead to inflation and that of Kerosene will affect the poor man adversely. The first is true in one way, but subsequent governments have done precious little to manage the demand for Diesel. HSD or High Speed Diesel, which is a middle distillate is the biggest culprit as far as import of petroleum products are concerned. We just do not have sufficient middle distillates. But the Governments could have done something long time back. They could have banned production and use of all Diesel cars and also that of generator sets of low capacity used for domestic purpose. Diesel is highly subsidised. Why should this subsidy go to rich guys who use a Diesel Mercedez, or Indica or Tata Sumo? Similarly the people who use domestic gen sets are again the rich. Also, it is a known fact that gen sets and diesel cars are the biggest polluters. A law making all cars and gensets petol run would have led to better management of HSD. Also, poor planning on the Power generation front has led to almost all Industrial units running captive generator sets run on Diesel to ensure continuous supply of stable power. Governments have slept since 1980s on augmenting the Power generation and distribution capabilities. Free power to rich farmers, demand supply gap, power theft (the transmission loss in India is 40% which is laughable as more than half of this is due to theft), delays in new power generating stations and sheer bad management of the distribution front has led us to a virtual crisis. Take care of power generation and distribution, diesel demand will come down drastically.

The case of Kerosene is funnier. Every political party makes a hue and cry if Kerosene prices are increased, saying the poor man is affected as he depends on it for lighting and cooking. No one has any statistics how much of the very highly subsidised Kerosene is used actually by the common man. Most of them dont get kerosene at all from the Public Distribution System. It is a big racket. 40 -60% of low priced Kerosene goes towards adultrating Petrol and Diesel in a big way. Increase the price of Petrol and Diesel while holding the Kerosene price, and the guys who are doing the adulteration are the happiest as they make windfall profits.

India's energy demands are growing, no doubt. But have anyone given a thought to the waste in hydrocarbons in the country. Most of our roads are congested leading to huge traffic jams and wastage of petrol and diesel. Instead of taking 10 minutes to cover 15 kms in a city, it takes close to one hour. 50 minutes of engine idling is a colossal waste. Take the case of our highways. The average speed that one can maintain in a highway is less than 60kms per hour, more likely 45 kms per hour. In any decent half developed country, one can easily cover close to 80 kms per hour. This means each trip takes twice the time. Again a waste of precious fuel. Most of our heavy vehicles have such obsolete engines that they are all fuel guzzlers. No legislation has been done on this. Finally, the check posts on the state boundaries. It is a regular sight of heavy vehicles running their engines, waiting in the Sales Tax checkposts, Motor Vehicle checkposts and Octroi Collection centres for hours together. These checkposts dont serve any purpose, are the nerve centres for massive corruption and delay transhipment of goods by hours. A lorry takes 17 days to travel on an average from Kashmir to Kanyakumari. And this after 60 years of independance. What a crying shame. And the fuel lost? Millions of Kilo litres. And, anyway why do we want check posts within the country? Removing them will do more for national integration than anything other single thing. Let us also not forget the biggest consumer of Diesel - Indian Railways. They consume 60% of the diesel in the country. And this is because of the slow pace of the electrification. If railway electrification has been done on a priority basis (almost 90% of our power comes from non-hydrocarbon based generating stations), we will not be facing the resource crunch on diesel.

The Golden Quadrilateral, 6 laning of the highways, the north-south and east-west corridors would have gone a long way in solving some of the problems mentioned above. Despite his many follies, Atal Behari Vajpayee was spot on in focusing on the above. But this government, in a pique, has put the project on the backburner, which is a crying shame.

Another initiative of Vajpayee was the interlinking of rivers. This has its roots about half a century back. I cannot talk of the environmental issues, but genuinely feel a cost benefit study should have been done, because of all the three modes of transportation of goods - air, rail and water- waterways remain the cheapest by a long way, apart from being the most fuel efficient.

I was a Sales Officer in Hindustan Petroleum Corporation during the Gulf War in 1991 when oil was scarce. We all ran a SAVE OIL campaign, creating awareness amongst the various categories of consumers - motorists, industries and household customers - regarding methods to reduce wastage of precious fuel. It was very effective. Why are we not doing something like this? ...................to be continued