Let's look for energy options

Subsidy cuts and differential taxation are energy options, says proposal

Published: Saturday 15 April 2006

Let's look for energy options

-- An alternative pricing mechanism for transport fuel in India is currently being proposed by experts. The key benefits of the new methodology, Fuel Saver, comes from the checking of fuel adulteration and its unlawful use. It is possible to check adulteration by real-time monitoring of supply and off-take of fuel through the supply chain believe proponents. They suggest mandatory presentation of identity tags to help check spurious and unauthorised use of fuel.

Discontinuation of the unwanted diesel subsidy is also proposed as a measure. The government presently offers a subsidy, which is availed mostly by private cars and sports utility vehicles (suvs). This only happens because of the absence of an alternative method for consumers to pay the full price. This is likely to be done away with. Eight of the political parties currently supporting the United Progressive Alliance (upa) government are demanding the withdrawal of subsidy.

Fuel price hike The proposal suggests an increase in fuel price to keep it in tune with rising crude oil prices. This, they believe, is required to keep the oil companies in business and allow the government to raise fuel tax revenue as well as manage demand. All this, coupled with incentives for more fuel-efficient vehicles, shared occupancy and focus on fuel expenses per passenger can mitigate resistance to any increase in fuel prices. An increase in fuel tax revenue will become a necessity, once the forecast about decline in oil supplies (after 'peak oil') proves to be correct. This seems likely soon.

Towards efficiency The proposal also emphasises improvement in fuel efficiency. This will make it possible to diagnose why a vehicle may be losing fuel against the prescribed standards of fuel efficiency. It will then, also be possible to prescribe remedial steps to vehicle owners/drivers for choice or quality of fuel and to agencies responsible for traffic and road conditions. The government will, for instance, get better feedback about the quantum of loss due to poor road infrastructure in a particular area. Public transport -- buses, taxis -- as well as shared-use vehicles are also likely to switch to more energy efficient and environment-friendly fuels, such as cng or hybrid as public service tranportproviders will have better economies in purchasing petrol-to- cng conversion kits, original cng or hybrid/plug-in-hybrid vehicles.

More and more taxis around the world, especially those in San Francisco, London, and Vancouver, are now hybrid electric vehicles. New York, which is considered the cab capital of the world, is readying itself for a hybrid revolution.

The proposal favours improved vehicle occupancy by offering incentives for higher fuel-efficient and shared-use vehicles during registration for private vehicles, as well as parallel measures to improve load factor in public transport services. This will go a long way in managing fuel demand in the country.

Environmental protection is also taken care of in the proposal. Vehicular emissions and other transport sector pollution will significantly reduce if the recommendations are put into place. The rigorous check on fuel adulteration and measures to improve fuel efficiency can be accomplished only by focusing on the use of appropriate fuels for vehicles -- such as hybrid/plug-in-hybrid, cng and electric-solar. This will also improve affordability.

Progressive taxation benefits have also been highlighted in the proposal. It is suggested that the government implement differential fuel taxation based on the vehicle index, which accurately reflects the cost-to- road infrastructure, to traffic flow and to the environment. Vehicle index factor and vehicle characteristics are to be used as the basis for fuel tax calculation. This means, suvs and other big cars pay more taxes on account of their fuel consumption when compared to motor-cycles and small cars and space efficient vehicles such as buses and trucks.

The proposal calls for a public debate on differential fuel taxation but government authorities believe that a public debate would prove to be an invitation to black marketers and corrupt fuel providers to charge different prices for the same commodity.

It is clear, however, that tough measures are needed for energy security and to check vehicular pollution.

Chandra Vikash is CEO of TEN Systems & Services Pvt Ltd

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