A joke we've played on ourselves

 
By Sunita Narain
Last Updated: Thursday 11 June 2015

The charade over the oil price hike has been played out. On the one hand, the government pleads helplessness given the spiralling oil prices globally, on the other hand, the opposition -- right and left -- frets and fumes about increased price of diesel and petrol. They want the government to cut taxes and ask the public sector oil companies to take a further hit in their profits. In this interesting partnership of the right and the left parties, the overriding interests are that of middle-class Indians, couched in the name of the poor.

But all this is completely short sighted and meaningless, because no party -- or the government -- has even once cared to explain what needs to be done to make us less vulnerable to oil shocks and protect economic growth. The fact is that the international price of oil has sky-rocketed over the past year or so. The fact also is that the worst is yet to come. Prices are expected to reach us $ 100 per barrel, up from us $35 a barrel, not so long ago. In all this, we know India is highly dependent on oil imports, and increasingly so.

It is also a fact that the sensex has touched a new high this week: everyone remains bullish about India's economic growth. But is it really the case that we will, therefore, escape the impact of the oil shock, that is beginning to hit other Asian economies? Is it really the case we can get out of this mess, by quibbling about prices and who will pay for it?

No. This is a completely blinkered view of the situation. The fact is that the price of oil dictates the pace of growth in any economy. Also, investment is required in mitigating the impact of that growth which benefits only a few, not all. We need resources to pay for environmental and social programmes. So, let us be clear, the price of oil will hit us where it hurts the most. We will not be able to invest in services for all, and not just the rich who can pay.

It is, therefore, essential we look beyond the price hike. We need to do the following: One, increase the efficiency of the oil used -- stretch its use -- so that we can do more with less. Two, find alternatives to the use of oil products, wherever possible, but as quickly as possible. Three, spend money in development carefully, so that the choices we make stretch the spending as much as possible and reaches the poor. We can no longer afford bad government spending.

Let us take up the challenge of efficiency. The Union ministry of petroleum and natural gas has, on its website, information about fuel consumption in the country, who uses what and how much. Putting this information together, it is clear that the transport sector is the single biggest user -- roughly 30 per cent of the total oil annually used. In contrast, the cooking energy consumption -- liquid petroleum gas (lpg), and kerosene (a billion-odd Indians survive on it) -- is less, roughly 20 per cent of the total. The power and industrial sectors, together, equal the transport sector, with 30 per cent consumption. The rest -- 20 per cent -- comprises miscellaneous users: the much-abused farmers use just 19 per cent of diesel in their pump-sets for growing crops.

The issue then is to maximise use in all sectors. Clearly, the first target should be the transport sector, growing madly -- and disastrously, so far as pollution, congestion and energy security are concerned. Roughly seven per cent of our consumption of oil products is for petrol -- mainly used in private vehicles, use that will grow as our cities maintain the car rush. The fact is that government does not even set guidelines or regulate fuel efficiency of cars, so that we can get more mileage per drop of petrol.

In addition, we need to plan for mobility without cars, for the sake of energy and environmental security. This is the time to implement programmes for public transport -- buses, rail-based transport. Can we seize the moment?

No. India likes to do the exact opposite. The finance minister, struggling to balance the books with the latest increase in oil prices, recently told a gallery of automobile manufacturers he is planning to cut taxes on small cars to increase affordability. What is revealing is that, till date, in most cities, passengers who ride in buses -- dirty and crowded as they may be -- pay more road tax than one who drives a car. The problem is that while manufacturers of cars and scooters are powerful and aggressive there is no active and equally vocal lobby for public transportation. As a result, we continue to encourage cars, use more petrol, be inefficient and quibble about prices. In all this, with the cost of oil increasing and less money for investment, there will be even less resources to invest into public systems.

The same is the case for the so-called fuel of the poor, diesel. The price hike will lead to increases in the price of everything -- from mirchi to milk, say our leaders. But nobody says this is because we chose to transport everything by road-based vehicles, which run on diesel. Nobody says we need a national mission for railways because it can transport much more, using much less energy. Instead, as I said, we do the opposite. The railway system is compromised today, emasculated and dismembered. Our dependence on truck-based transportation grows, and grows.

In all this, we speak in the name of the poor. So, prices of diesel are kept low by not using it to cross-subsidise other fuels like kerosene. But we act for the rich. The same diesel, which is reserved for the poor, is used by the rich in their cars. And nobody objects. It does not matter.

It is cruel charade, as usual. Only this time, the joke is on us.

-- Sunita Narain

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