The Centre is justified in raising the excise duty on petrol and diesel. The view that a fall in global prices should be passed on to the consumer does not wash.

While aligning fuel prices to global levels, the disparate nature of end-users should be kept in mind. A one-price-fits-all strategy does not make sense. Inefficient users should pay a higher price, even as prices in general move up or down.

This calls for a subtle approach — protecting vulnerable and energy-efficient users while at the same time attaching value to a scarce commodity. India’s petroleum policy is nowhere near achieving this balance. It is wedded to a simplistic notion of ‘decontrol’.

India freed petrol prices in June 2010. But by subsidising diesel use after June 2008 when oil prices started to climb sharply, it ended up creating a market for high-end diesel cars. So, while the aam aadmi enjoyed a degree of protection, cars and SUVs ended up accounting for 27 per cent of diesel use. To cut its diesel subsidy bill, the government resorted to a monthly increase of 50 paise after January 2013, hurting the masses without really altering the bias in favour of diesel-run cars. Now, the global oil price crash has created a situation where aam aadmi and car users can benefit. Should the latter be rewarded?

A three-tier pricing policy for diesel — one that distinguishes between the Railways, truckers and car-users — is worth considering. Lower prices should be fully passed on to the Railways, and not to car-users. Truckers can pay an intermediate price, so that the Railways can be the preferred mode for freight movement. The view that multiple pricing can lead to a diversion is not convincing. It is not a tall order to mandate different nozzle sizes for different types of vehicles so that fuel pumps become vehicle-specific.

We need to think differently. Decontrol is a crude idea.

A Srinivas, Deputy Editor

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