Friday, January 18, 2013

DIESEL PRICE HIKE: REDUCING SUBSIDY BURDEN THE WRONG WAY ??

During the last about ten days the Indian government had a single point agenda of increasing diesel prices in the name of reducing the subsidy burden on the Indian budget. Diesel subsidy? What a misnomer? First of all the oil and petroleum fuels are taxed heavily and their taxes contribute something like Rs 2.00 Lakh crores to the government kitty out of which about Rs 90000 crores are used for the so called subsidy burden. And subsidy for whom? In fact about 50% of the diesel is consumed by government itself, mainly by defence, para military forces, railways and road transport etc..Then we have diesel driven private vehicles comprising of sedans and SUV's in luxury and super luxury class and rich individuals, business and corporate houses  along with  government bureaucrats, legislatures who all make merry with the subsidized diesel. If the government decides to do away with total subsidy in these sectors alone and introduces a 10% cut on the quantity of diesel consumed by government, there will be an immediate decrease of about Rs 5000 crores per month to the fiscal deficit. Leaving the goods transportation, agriculture, industrial and power sectors to become subsidy free in a time span of about three years will mitigate all fears of inflationary pressures.
Oil and petroleum minister was heard saying that oil companies will close down if subsidy not removed. It appears that government will close down if it does not make use of such subsidies for its functioning. Why should a common man suffer for the inefficiency and living beyond means culture of the government. Let the government look into the hardships being faced by a common man because of inflation on every front. Let it not be penny wise pound foolish, for what ever amount a small increase in diesel price will give to the government kitty, a large part will go as the expense towards Dearness allowance hike of all central and state government employees and pensioners.