Jaipal Reddy for additional duty on diesel-run passenger cars

NEW DELHI, October 21, 2011(Tehelkanews)

For the first time in 15 years, the demand for petrol has dropped below that for diesel due to massive gap of Rs. 26 per litre between the price of petrol and diesel.The continued rise in petrol prices and the high content of subsidy for diesel has led to a situation where demand for diesel cars has been growing at an amazing rate and that for petrol vehicles declining. Consumers are opting for the vehicles which run on the much cheaper fuel as compared to petrol.



Petroleum and Natural Gas Minister, S. Jaipal Reddy said his Ministry has already proposed to the Finance Ministry to impose duty on diesel-run passenger vehicles as 15 per cent of the total diesel consumption is by such vehicles.



As a result of selling petroleum products — diesel, LPG and kerosene — at subsidised rates, the oil marketing companies (OMCs) are incurring huge revenue loss. The estimated annualised loss on diesel alone stands at Rs. 67,000 crore.



This has forced the Petroleum Ministry to seek a higher level of financial assistance for the OMCs from the Finance Ministry. For the first quarter of the current fiscal, it has sought Rs. 15,000 crore to compensate the oil retailers for the revenue loss incurred. For fiscal 2011-12, the OMCs are projected to lose Rs. 1, 21,571 crore at an average price of the Indian basket of crude oil at $110 a barrel.



Oil ministry report on diesel consumption



According to the latest data by Petroleum Planning and Analysis Cell of the Petroleum Ministry, petrol consumption growth has moderated to 4.5 per cent in August compared to 6.4 per cent for diesel. From less than a quarter in 2005-06, the share of diesel vehicles has risen to nearly half of car sales now. The Centre for Science and Environment had some time back pointed out that continued heavy subsidisation of diesel had resulted in people shifting to buying of diesel vehicles. The subsidy on diesel had led to a situation where consumption by private vehicles - passenger cars and SUVs — exceeds consumption by the public transport and agricultural sectors.



The PPAC report said historically, petrol consumption recorded a compounded annual growth rate of 5.6 per cent against 2.5 per cent for diesel. In the latest instance, however, the cumulative growth in petrol consumption in the April-August period has moderated to 5 per cent against 5.3 pr cent for diesel \"and is heading towards historic low. It said the difference between the cost of running a diesel and petrol car was forcing more and more consumers to opt for the former even though these cost nearly Rs. one lakh or more than their petrol variants.



According to CSE, the continued hike in petrol prices was unreasonable as the Government was ignoring the severe public health impacts of 'dieselisation' of the country's cities which are reeling under rising levels of killer particles, NOx and ozone.



The CSE said diesel cars are already 36 per cent of new car sales in India; the figure is expected to touch 50 per cent very soon. It is even more worrying that in the compact car segment – that are more numerous and popular — diesel cars are already half of all car sales. Cheap diesel is not only worsening the public health risk, but also encouraging more motorisation and congestion, it added.



"It is ironic that while the fuel tax differential has been officially justified in the name of agriculture and freight, rich car owners have benefited more from it. Cars have already become the second biggest user of diesel and beneficiaries of the official fuel tax policy. Cars use up 15 per cent of the total diesel in the country – compared to 12 per cent by buses and agriculture each, 10 per cent by industry, and 6 per cent by the railways,'' the CSE said.



It said various expert reports of the Government have recommended additional taxes on diesel cars to neutralise the effect of low-tax diesel. But the government has yet to muster the courage to impose the tax.



It said CSE researchers found out that the government incurs huge revenue losses, as it earns much less from excise on a litre of diesel used by cars (Rs. 4.60), as opposed to petrol (Rs. 14.35). These losses will increase with the growing numbers of diesel cars. At the same time, there is under-recovery of costs. Diesel prices account for around 60 per cent of the under-recovery or losses of the oil sector.



Other countries have taken fiscal measures to discourage diesel in cars. In Brazil, diesel cars are actively discouraged because of the policy to keep taxes lower on diesel. In Denmark, diesel cars are taxed higher to offset the lower prices of diesel fuel. In China, taxes do not differentiate between petrol and diesel. Sri Lanka has imposed very high duties for diesel cars.



CSE said diesel has serious health concerns. Even with the introduction of Bharat Stage III and IV fuels in April 2010, the debate over its toxicity continues to rage.



According to the World Health Organisation (WHO) and other international regulatory and scientific agencies, diesel particulates are toxic air contaminants and human carcinogens. These are even blamed for killing unborn foetuses. The cancer causing potential of diesel particulates and emissions is several times higher than some of the worst known air toxics.


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