governance, political economy, institutional development and economic regulation

Posts tagged ‘transportation’

Slash petroleum consumption

free

Retail prices of diesel and petrol are the lowest in Delhi, among India’s key metropolitan cities. It isn’t cheaper to supply them to the national capital than in Chennai, Mumbai or Kolkata. The difference is that Delhi and Goa levy lower value-added-tax on petroleum products (PP) than poorer jurisdictions, even though they are havens for high-income residents. But charity, they say, begins at home. And Delhi – the home of two governments and five municipalities – is the biggest beneficiary of a twisted application of this principle.

Bring petro-products under GST for pan-India consumer equity

State-level autonomy should be, but not to subsidise the better-off. Goa has the highest per capita gross state domestic product, followed by Delhi. Bringing petro products (PP) under a uniform Goods and Services Tax could ensure equity for consumers across state borders. Punitive tax rates on PP are desirable to slash consumption.

Petro Products import destabilise our external balance

We import 80 per cent of our PP requirement. The net import of crude oil and PP (after subtracting earnings from export) accounts for 50 per cent of our merchandise trade deficit. This is an unsustainable draft on foreign exchange resources. Oil price fluctuations are a of considerable volatility in the exchange rate of the rupee. This has knock-on negative effects on cross-border capital flows and the servicing of our external debt.

Petroleum prices instantly transmit shocks from war & politics internationally

In March 2018 the International Energy Agency said that “oil production growth from the United States, Brazil, Canada and Norway could keep the world well supplied, more than meeting global oil demand growth through 2020”. We expected lower oil prices. But in May, US President Donald Trump decided that Iran — a major oil exporter — should be threatened with sanctions for alleged deviations from oversight constraints on its nuclear enrichment programme, agreed with the United States under former President Barack Obama.

India is particularly vulnerable to collateral damage on its energy security. This alone is sufficient to push us to use PP mainly for road freight. In addition, there is the global need to curb carbon emissions and the domestic imperative to reduce air pollution and road congestion in cities.

High taxes and retail prices on petro-products & associated private motor vehicles can finance adaptation and mitigate the negative externalities.

Discriminatory taxes on the purchase of vehicles, graded by their carbon intensity and on fossil fuels – other than cooking gas and natural gas for meeting peak electricity demand – are socially desirable. Pricing diesel – an efficient but polluting fuel – the same as petrol can discourage its use for light passenger vehicles. The use of cooking gas rather than wood, coal or kerosene, has significant health benefits, particularly for women. It is a merit good. Using Rs 300 billion, or 10 per cent of the Union government’s Rs 2.8 trillion revenue from indirect taxes and royalty on the petroleum sector, as subsidy to promote cooking gas, is justifiable.

Consumers of petrol and diesel feel short changed since they never benefited from the decline of international crude oil prices. During the past four years (FY 2015 to FY 2018), the average cost of the Indian basket of crude was 43 per cent lower at $58.6 per barrel, than during the previous four fiscal years at $102.6 per barrel. Part of the reduction in oil prices was negated by depreciation of the Indian rupee. The average exchange value of the rupee against the US dollar was 24 per cent lower at Rs 64.50 during fiscal 2015 to 2018 versus Rs 52.10 in the earlier period FY 2011 to 2014.There was an insignificant change in the average retail price for petrol in Delhi between these two periods. It hovered on an average between Rs 64 to Rs 65 per litre. The Union government used the windfall benefits from cheaper oil to reduce the fiscal deficit by one per cent of GDP over the last four years. This was sensible. But more sustainable options are needed to remain within the fiscal deficit target of three per cent of GDP.

Oil price to remain high but stable this year: 

Significant changes in the oil price ($82.73 per barrel currently for the India basket) are unlikely this year. China will defeat the purpose of US sanctions on Iran. The rupee will also likely remain around Rs 72 to Rs 74 to the US dollar. The retail price for petrol in Delhi of Rs 80-plus per litre could be here to stay. Is this a killer for the average consumer? Not really.

Fuel cost is not the major cost in private transport

Consider that even at Rs 85 per litre, the petrol cost is just one-third of the total cost of using a low-end, high fuel-efficiency car over a life cycle of 100,000 km. For high end cars the fuel cost is even lower between 20 to 25 per cent of life cycle cost. Two-thirds to four fifths of the cost comes from the purchase price of the car and its maintenance.

Delhi is congested with private motor vehicles because fuel is cheap

Delhi accommodates just 1.5 per cent of India’s population. But it has 10 per cent of two-wheelers; 23 per cent of cars and 10 per cent of jeeps in the country. Low retail prices for petro-fuel incentivise Delhiwallahs to shun public transport; car pooling; the use of bicycles or merely walking to their destinations.

Cheap fuel makes public passenger transport unattractive 

bus service

Consider also the ensuing disincentive for a commercially viable, well-staffed, secure and reliable public bus or metro service because the alternative of personal transport is much more attractive. Admittedly, Delhi has severe security issues – particularly for women. But higher VAT on fuel can fund a bigger fleet of buses; finance a PPP with Uber, Ola for a 24×7 high-end bus service with digital security features; bridge the price gap with electric cars or fund secure bicycle and pedestrian tracks and overbridges. Levying user charges for overnight parking can reduce encroachment on colony roads in residential areas.

A mix of incentives and disincentives can wean people off their yen for motorcycles and cars. Massive, mobile chunks of highly-polished metal do not define the value of a human.

Highly polished, mobile, metal spewing toxic waste and hogging road space is a perverted status symbol

cars

These are hollow status symbols and a toxic wall between the haves and the have-nots.Our metros, like the National Capital Region, are well and truly mollycoddled. These magnets of opportunity attract migrants well beyond sustainable levels, who feed their sprawl. All those who choose to live here must learn to pay for the social and environmental cost they impose on the rest of India via their higher consumption standards. Equity should start at home.

Adapted from the authors opinion piece in The Asian Age, September 5, 2018 http://www.asianage.com/opinion/columnists/050918/pampered-metros-need-a-reality-check-on-fuel.html

Who Let the Sardar Out?

 

 

Only in India, would a proposal to erect a statue. in memory of Sardar Patel, who oversaw the integration of princely splinters into India, as we know it today, create so much controversy. After all, the poor Sardar only added to the land mass of India, like Mrs. Gandhi, who added Sikkim. He did not give any land away.

 

It would be understandable for citizens to object if the Sardar was still alive and yet got his statue erected, in his own lifetime. It would be understandable, to object, if the Sardar’s family had maneuvered to grab a piece of prime public land to dedicate to themselves. It would even be understandable if the Sardar was a just passing side show, in the political drama of the independence struggle.

 

None of this being the case, it is puzzling why the fuss about the proposed statue in the Narmada Sarovar? All the poor Sardar got, for his efforts during the independence struggle, was a chowk named after him in Delhi, from where he balefully contemplates the goings on in Parliament, visible down the road, through the noxious fumes of traffic.

 

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Most comical are the efforts of those who claim that the Sardar belongs to “all of India” and not just Gujarat, where he was born. They are horrified that the Gujarat Government should choose to honour him thus, even though the Sardar was not from the political party which is currently in power in Gujarat. Who remembers which party Abe Lincoln or Churchill were from? National figures are bigger (or should be) that just their party. Of course, they belong to the Nation, which also includes Gujarat.

 

Some question whether INR 2500 crores of public money should be spent on the Sardar’s statue? After all this could feed 2.5 million poor people for a year @ Rs 27 per day! To these critics I can only say, if a proper statue to this illustrious “son of India” had been made in 1952, just after he had died, the cost would have been just INR 60 crores. The remaining INR 2440 crores is the cost of public neglect, over the last 60 years, of the political legacy of those (and there are many more besides the Sardar), whose families did not press to perpetuate their public image.

 

Others object that the BJP is rewriting history, by “appropriating” the Sardar, who they remind us, banned the Hindu Maha Sabha, of which, the current version is the Rashtriya Swayamsevak Samaj, the ideological font for BJP cadres. To these history buffs I say, emulation is the highest form of praise. The Congress should be happy that the BJP is commemorating one of their tallest leaders.

 

Still others assert that a better (and cheaper) way of remembering the Sardar would have been to name a public welfare scheme, or two, after him as there are for the Mahatma, Nehruji and Rajiv Gandhi. What they forget, is that a rose, by any name, smells as sweet. No one else remembers the name of a welfare scheme. What citizens care about is the tangible benefits accruing to them.

 

The most comical are the efforts of the BJP “permanent representatives to TV channels” who are at pains to explain that INR 2500 crores is not just for the statue but includes museums, viewing platforms, food plazas, movie halls, water sports and other such essentials of a global tourist hot spot. A truly Gujarati response; refuting allegations of public profligacy, by spelling out the “value for money” proposition and the “bankable revenue model”, behind the project.

 

In India, even a political legacy must “pay back”. After all, this is the land of the Maruti car with its apt advertisement: “kitna dete hai” (how far does the car run on a liter of petrol), illustrating the essence of India. This is still the land of those (like me) who darn their socks and repair their worn underwear. But it is also the land of the new rich Indians, who swivel their “single malt whisky, with just a splash of water please”, ride in their newly acquired INR 2 crore Bentleys to their INR 200 crore bungalows, but crib about the increase in the price of diesel and the horrendous waste on “the Patel statue”.

 

It is not the poor who are petty. They see jobs and opportunities for micro business behind the Sardar’s statue, in hospitality, tourism, transportation, retail and civil maintenance. They know that it is better for a few thousand poor to get sustainable livelihoods, rather than stand in line with folded hands, along with 2.5 million of their brethren, to get INR 27 per day for just one year.

 

 

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