When I started writing, I was excited that finally there was a possibility that the Govt. was thinking logically and will try to bring in a way to ensure that the subsidy given for Diesel is not misused by the passenger car segment. However by the time I am finishing this post the honourable FM has issued statement that there is no proposal to either increase the excise duty for Diesel Cars or to price diesel differently for passenger cars.
It is surprising that passenger car segment is the 2nd largest consumer of subsidised Diesel and still Govt. is not taking any steps to set right this loot.
Govt. has been always talking about the financial drain resulting out of subsidising Diesel.
Question arises, why subsidise Diesel in the first place?
Primarily the transport sector and the agriculture sector use Diesel as fuel for their trucks & pump sets. Logic behind subsidy was to ensure that cost for these sector is to be kept low to ensure that the end costs of their service/product is affordable to public.
This logic has ensured that we continue to subside all Diesel sales even though today diesel has a much wider usage like in passenger cars, in gen-sets powering the posh houses, commercial complexes & offices. Today at least half of all diesel sales is towards these non-core usage. Given the rising economy and affordability levels, more people are buying gen-sets & diesel cars thus driving up the demand and with it the subsidy burden.
What’s wrong in subsiding diesel for Cars?
Passenger Cars are personal modes of transport and are a luxury. Further no poor buys cars, most car owners have decent income.
It is wrong for the Govt. to subsidy private costs.
So what can be done?
1. Simplest wish would be to ban Diesel cars – it is easier said than done. some people will even argue about the mileage efficiency of diesel cars, job losses if car manufacturers are told to stop production of diesel cars.
2. Differential Pricing of Diesel for Cars – Good Idea, but given our Countrymen’s efficiency in corruption, we will end-up promoting a new corruption industry.
3. Increase the Excise Duty for Diesel cars – Very Good Idea. But what happens to existing Diesel Cars? Also the Excise Duty amount to cover the subsidy cost for a normal usage of the car over a period of 5years will increase the cost of the car by a substantial amount.
4. Increase the Road Tax for Diesel cars – I recommend this idea. Collect additional road tax in proportion to the Cubic Capacity of the Engine. Make people pay yearly or once every 2-3years.
My suggestion is Rs.10 for every CC of the engine.
During registration collect additional “diesel road tax” for 2year period and then require the car owner to pay every alternate year.
Yes, this will increase the administrative expenses in collecting the tax. but this will ensure that existing diesel car population is also covered and with the advancement in technology Govt. can provide online payment option which will ensure smooth & easy payment option for car owners.
In case of tourist vehicles, they are anyway required to visit RTO offices every year for a FC (fitness certificate), they can be made to pay at that time.
But why are the politicians not interested in doing this?
1. Most politicians own high-end cars that run on diesel. They are just trying to keep their running cost down.
2. This change will pinch the rich & powerful, so they don’t want it.
3. Car Manufacturers see that this will cause a fall in sales.
3. Who cares about poor and improving the public transport.
Probably only when we think as a nation and not individually will such laws be implemented in India.
I hope some State Government will take this initiative and not wait for Central Government to do it.
Or do we need Supreme Court to step in this issue as well…