Make diesel cars dearer

Diesel cars typically cost Rs 1 lakh or so more than petrol engine-driven cars of comparable capacity. But then, diesel is today about Rs 26-a-litre cheaper and present-generation diesel cars offer an extra 4-5 km-to-a-litre in mileage as well. So, if a petrol-engine car owner consuming 100 litres a month opts for a diesel car, he would straightaway save Rs 2,600 on fuel costs and, as a bonus, also manage to drive an extra 400-500 km! Small wonder, why petrol cars are gradually going off the roads: Diesel cars now make up four out of every five cars sold for models offering the diesel option. While a delightful proposition for individual consumers – who, the more they drive, the faster they would recover their extra investment – it is an unmitigated disaster for the economy as a whole. At over 60 million tonnes (mt) annually, diesel accounts for almost 45 per cent of India's total petro-product consumption. That makes it the most widely burnt fuel, ahead of petrol's 14-15 mt. In 2008-09, an estimated 15 per cent of diesel consumed in the country went to fuel passenger cars – a share that would only have since gone up.

That raises fundamental issues concerning not just efficiency (which is not helped by encouraging consumers to burn more diesel), but even equity. Who are the ones increasingly benefiting from a cheaper fuel originally intended for farmers, truckers and public transport utilities? And what about the impact of ever rising petrol prices on the aam aadmi or those who commute by two-wheelers and auto-rickshaws? They do not have the diesel option available in the spacious sedans used by the more privileged khaas aadmi .

It is in this backdrop that one must welcome the Government's reported move to hike the excise duty on diesel cars in the forthcoming Union Budget for 2012-13. In fact, there is no reason why it should not have been done earlier. But that alone might not be enough. There is also a need to address distortions arising from the huge price gap between the two vehicle fuels. This can be achieved only through marginal hikes in the price of diesel and a substantial reduction in the tax component of petrol. The latter would refurbish the credentials of the Government as being sensitive to the concerns of the poorer and lower middle classes. Personal transport vehicles are primarily used in the course of earning one's livelihood. The population of two-wheelers outnumbers that of cars by a huge margin and they would, therefore, account for a significant chunk of total petrol consumption in the country. It is hard to believe that the Government wants this class of users to be subjected to a crippling levy, while letting off those rich enough to own diesel-powered cars.

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