Nothing to smile about!

Yashwant Sinha pleases the industry by playing a rude joke on the environment

Published: Saturday 31 March 2001

hailed as a "bold" step to create the right environment for economic reforms, the Union Budget, presented by Union finance minister Yashwant Sinha on February 28, totally ignores the real environment. Rather, it creates an atmosphere to pollute the environment in more ways than one.

At a time when there is growing pressure on the government from the civil society and the judiciary to clean up the cities and towns, the budget is all set to increase vehicular emissions. An eight per cent duty has been imposed on compressed natural gas (cng), a clean fuel that is going to be adopted for Delhi's public transport -- an initiative that the Supreme Court is pushing for. That the government is least concerned about encouraging this fuel is evident from the fact that the increase in the excise duty for diesel and petrol has not been passed on to the consumers, thus encouraging consumers to use more of these polluting fuels. The increase in diesel and petrol excise duty, instead, will be absorbed in the oil pool account (opa). While the duty on cng will fetch about Rs 6 crore as revenue, the absorption of the duty raise on diesel and petrol by the opa would cost the exchequer Rs 5,440 crore.

Petrol has got a duty raise of 16 per cent (from the earlier 16 per cent duty to 32 per cent) and in case of diesel it is four per cent (from 12 per cent to 16 per cent). The very step of absorbing this hike in the opa contradicts the budget's proposal of making the price of petroleum prices that is market driven. Currently in India the diesel and petrol prices are deliberately insulated from international price fluctuation by a method called administered price mechanism. The government burdens the taxpayers to subsidise the price of dirty fuels like diesel. In the budget, the government proposes to do away with this mechanism by March 2002. "The budget may be a growth-oriented budget, but has not kept in mind the issue of sustainability. There is a decrease in excise duty of the auto industry and no corresponding incentive to clean technologies," says Kanchan Chopra of the Delhi-based Institute of Economic Growth.

The renewable energy sector has also got a raw deal. Due to the subsidised cost of conventional energy sources, renewable energy options have not got the much-needed push. The budget has given priority to power reform, but has not dealt with renewable energy sources such as solar or small hydro-electricity projects.

Continuing with its romance with the automobile sector, the government has reduced the duty on various vehicles thus benefiting automobile manufacturers. The step has been taken to arrest the slump in car market. On two-wheelers the excise duty has been brought down to 16 per cent from 24 per cent, while for cars from 40 per cent to 32 per cent. To protect Indian manufacturers from the invasion of second-hand cars and scooters from foreign countries, import of second-hand cars have been made costlier with an effective custom duty of 180 per cent.

The budget has also not rationalised the custom duty on naphtha that would encourage adulteration of petrol and diesel. From April 1, 2001 naphtha would be available for import on an open general license. This will result in availability of more of it, thus increasing the possibility of further adulteration. The custom duty on naphtha is five per cent, whereas that on crude petroleum is 10 per cent. Once the import is liberalised, refineries would export naphtha, because every tonne of naphtha will enable them to import 1.2 tonnes of duty free crude under the present arrangement.

For rural sector, the budget applies the same principle of high growth but low sustainability. At a time when the country is facing a severe drought for the third consecutive year, there is nothing much for the rural development department that implements watershed development activities. Of the total plan outlay of Rs 130,181 crore, the rural development sector gets only Rs 6,846 crore.

"More money should have been pumped in watershed development, minor irrigation and food for work programmes. We have such a tremendous foodstock and these programmes should have been launched," says Jayati Ghosh, professor of economics at Delhi's Jawaharlal University.

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