The Hindu Business Line : Rising crude prices

A hike in diesel prices will have a cascading effect and reflect in hike in the price of every commodity. Petrol, on the other hand, will not have such a huge impact on the prices compared to diesel.

In this hour of crisis, the government could seriously contemplate pegging the diesel prices at, say, Rs 37 a litre for the next few years.

This price is limited to all goods carriers and public transport vehicles only, so that the common man is not hurt by the cascading effect of diesel price rise.

On the other hand, the subsidy on petrol and diesel for private use must be totally de-regularised. This would be an administrative challenge. This dual policy of diesel distribution will have dual advantages.

As the prices of petrol and diesel for private vehicles increase steeply, people will shift slowly to public transport at no increase in cost.

This will consequently reduce congestion on roads.

If this policy of dual distribution of diesel is coupled with little reduction in excise duty by the Centre and sales tax by the States, it will result in lesser price of diesel (for public transport vehicles and goods carriers), thereby bringing down the costs of essential commodities, which will help stem inflation.

In the long run, the government must give fillip to research on alternative sources of energy, provide better public transport and impose prohibitive taxes on big cars and luxury cars.

M. S. Sunil e-mail