Cooking the goose...

By Anil Agarwal
Last Updated: Thursday 11 June 2015

Finance minister (FM) P Chidambaram's budget has been hailed by the media and the public as a landmark exercise. It has also been applauded for being a 'growth budget'. For instance, the New Delhi-based weekly Outlook describes it as a 'Miracle Budget' which has given the nation new hope. The Bombay Stock Exchange sensitive index immediately recorded a rise: an increase of 429 points in the SENSEX in the three days between February 27 and March 1. Automobile magnate Rabul Bajaj reportedly went on and on at a meeting of the Confederation of Indian Industry in fulsome praise of the budget.

Undoubtedly, Chidambaram has done a good job of using the fiscal measures available to him for giving a thrust to industrial development. At the same time, by failing to take any serious measures to balance this development with environmental concerns, he has cooked the goose - and lives - of millions of people. A quick idea of the impacts that are likely to take place as a result of this budget comes from the companies that have been most bullish on the stock market following the budget. The company which made the biggest gains was the Associated Cement Company (ACC) - a jump of 261 points in three days. In other words, people expect cement consumption to go up with middle class disposable income increasing and, therefore, a demand for more construction-related activities. This can mean more pollution from cement plants and damages caused by mining unless remedial measures are forced on the industry. The second company which recorded a big leap was Bajaj Auto - a jump of 134 points in the corresponding period. This company produces the notorious two- and three-wheelers which are highly polluting and have turned cities like Delhi into toxic paradises. More people can now be expected to buy these two-wheelers, congest the roads and add to the already over-whelming pollution.

The point is not that ACC and Bajaj Auto should not grow and people should not get more vehicles or more houses; or, that economic growth is not necessary. But what did Chidambaram do to take into account the environmental and health damages that this growth would bring about? So do we now reconcile ourselves to more premature deaths, more cancers, more deforestation and more displacement?

Since balancing fiscal measures - which would have given appropriate market signals to manufacturers that growth is essential but only with environmental sustainability - were not thought of, the action will now have to move to Central and state regulatory agencies to enforce environmental laws. Given the fact that these agencies have proved to be dismal failures - witness everyone's mad rush to the Supreme Court to seek environmental redress - we can now stew and die in this cauldron of crass materialism.

Even the two tiny measures undertaken by the FM to reduce vehicular pollution are both bad and outdated. The customs duty on catalytic convertors was reduced from 25 per cent to five per cent and on compressed natural gas (CNG) kits from 10 per cent to five per cent. Also, all customs and excise duties have been waived off on goods required for setting up new projects with non-ozone depleting technology.

By giving concessions to catalytic convertors and CNG kits, the FM is making a choice of technology. Who in the government or industry knows these two items can solve India's urban air pollution problem? Literally nobody. Neither in India nor in the world. Who knows which technology will succeed in the market? Which fuel or equipment will be easily available, offer the maximum cost-effectiveness and maintainability in the market? It will depend not only on the technology or the fuel but also on the organisational and marketing capabilities of the manufacturer. Only the market can tell what succeeds and what doesn't. In fact, people can levy a charge of dishonesty against the Fm that he was bought off by the CNG and catalytic convertor lobbies.

While there may not be any truth in such a charge, there is no doubt that the FM has pushed the pollution control market towards these technologies and their manufacturers, and has given no incentive to vehicle manufacturers to improve their engine design. If the engine design and the fuel quality is bad, what will catalytic convertors do except putting up a facade of pollution control efforts being made? Even where engine design and fuel quality are not constraints, as in Britain, experts are finding that catalytic convertors need regular maintenance and work much less efficiently when engines are cold or operating at low speeds. They are, therefore, pretty ineffective in urban areas. In fact, the British government's air quality modellers had predicted improved air over time with the installation of these catalytic convertors but found, much to their embarrassment, that this was not turning out to be true.

Chidambaram should have taxed vehicles according to their levels of emissions - thus, rewarding those who made efforts to produce more environment-friendly vehicles - and left it to the manufacturers to choose the technology/fuel options and compete in the market. Catalytic convertors are ineffective with high-sulphur diesel, as is the case in India. As regards CNG, has anybody worked out an adequate supply scheme to turn it into an urban vehicular fuel? We are totally unimpressed by the useless provisions made in Chidambaram's budget to deal with pollution control.

Possibly the most nonsensical proposal is to fully exempt from customs duties the import of fuelood, wood logs, wood chips and charcoal. What this really means is that India will subsidise the afforestation efforts of other countries by giving their products a market here. Don't we want to grow trees on the millions of hectares of degraded lands that exist in government and private hands? Just take one set of figures - India wants to cover one-third of the country with trees and forests. The forest departments own 23 per cent of India's land area. The remaining 10 per cent or 30 million ha which is in private hands and which will have to come under a tree cover, is equal to the size of Uttar Pradesh. Can such a large amount of land come under trees unless an attractive market for wood is created in India? Afforestation will take place only if the government learns to involve the people and takes steps to develop a wood market that is remunerative to tree growers.

The lesson of all this is that this country's government may have learnt to make growth-oriented budgets, but not budgets for sustainable development. Even the media has to learn how to analyse the environment-friendliness of the budgetary exercise.

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