India imports about three fourths of its requirement of crude. In financial year 2012, this cost us Rs 726,386 crores[i]. After taking away the exported oil products, the net outflow India incurred was Rs. 441,743 crores. The subsidy provision for the year 2014 is budgeted at Rs. 80,000 crores, but experts estimate it at Rs. 1 lac crores, in best case scenario. This means the money central government gives to oil companies and others in the fuel chain, to compensate the loss incurred by selling lower than costs. Adding the subsidy to the fuel deficit gives the amount of tax-payers money going up in smoke, literally. For those not paying tax (which is a whopping 97% for income tax and nearly 70% for most other taxes[ii]), this means nothing. Given this situation, commonsense says don’t promote excessive use of fuel. With 1.2 billion people, having a low per capita consumption of fuel will be in the best interests of the nation, its people and its environment – that’s commonsense too. Commonsense also offers a plausible solution – the way to reduce per capita fuel consumption is to promote public transport (‘work from home’ and ‘live rural’ are not valid choices for Indians within the current practices).
But it seems common sense is not something which our government is endowed with. Quite contrary to common sense, the government keeps repeating three stupid mistakes for the last 20 years.
(a) Consistently reducing excise duty on cars.
(b) Subsidizing diesel for use in oil guzzling SUVs and cars owned by those who can afford non-subsidized fuel.
(c) Delaying decisions on public transport for cities. Urbanization is cheered and expanding cities are considered a sign of successful governance.
Let’s look at each one of these in a little more detail…
(a) Reducing excise duty on cars.
We don’t need a scientist to tell us that making cars cheaper will increase the per capita consumption of fuel. Despite this, our finance minister has been consistent in promoting the use of cars! Every year the finance minister offers a reason to celebrate for the automobile industry – at the expense of the tax payer. Going against all common sense, this is what Chidambaram said in the interim budget 2014 “To give relief to the automobile industry, which is registering unprecedented negative growth, I propose to reduce excise duty“. LOL .
Can we not take a lesson from some of the better managed countries? Take the case of Singapore – here, cars are taxed 100% on their OMV (Open Market Value),then there’s the Additional Registration Fee (ARF) of varying slabs, all above 100%. And finally the prospective buyer has to buy a Certificate of Entitelment (CoE)[iii]. For car owners, there is a Carbon-based Emissions Vehicle Scheme (CEVS), which imposes penalties on polluting vehicles. Most banks have raised interest rates on car loans. To offset this discomfort for citizens, Singapore offers them one of the best public transports in the world.
(b) Subsidizing diesel and sale of SUVs
Cheaper diesel and a growing fascination of truck-sized SUVs is further burdening the fuel deficit. The sale of SUVs in India by 2019 is expected to reach 1 million vehicles. How can India suddenly afford Toyota Fortuners, Landcruisers and Audisa and BMWs? Answer is simple. Where do you find the most number of expensive SUVs in Pune? Hinjewadi, Kharadi, Hadapsar, Talawde….where people have made crores of rupees by selling of family agricultural lands. Employeed people can hardly afford to buy the white elephants, but windfall gains makes owing them easier. Across Indian cities, land prices boom and feed the burgeoning SUV market. Despite a reduced demand for cars in 2013, SUV sales increased by 16.4%[iv]. Do these owners need subsidy on the diesel? Ask commonsense.
(c) Metro rail in Indian cities.
The more we delay metro rail transport for cities, the less its chances of reducing vehicular traffic. The reason is simple. Today in 2014 cities have grown in all directions, and planning metro routes can never be optimum and hence its potential to replace cars or bikes is not the best. In Europe, cities built metro even before they expanded. This restricted the growth around metro stations increasing its usage. Similarly in Mumbai, residential areas come up around local train stations. In this case, public transport helps reduce vehicular traffic.
Pune has been discussing public transport for the last 20 years, both the BRTS and metro rail. The discussions take place between three parties – (i) Corporation employees (many of whom are here only because it is a safe job, not requiring any talent whatsoever) (ii) Politicians (who have no clue of public transport, but want to visit Paris to study it anyway) and (iii) Central government departments (who are overworked, under skilled and busy defending past failures). Whenever we do get a metro rail, this combination will ensure that it will be useless for replacing much vehicular traffic.
Why commonsense eludes our political parties
Growth is easy to prove with numbers, but development is not often quantifiable. This elevates fuel consumption to a nice measure of growth – more cars, more growth! On the other hand, improved public transport can reduce fuel consumption, reduce demand for two-wheelers and certainly reduce the GDP! This badly affects the progress card of any political party! Who cares for commonsense! But then building a metro has its own benefits – the main one being a singularly powerful measure of ‘work done’ by the politician. This is perhaps the only motivation which can drive metro rail decisions in our country. In case the central government is not the same political party as the state government, decisions are delayed for competitive reasons.
When a political party lacks strategic national development goals, social return on investment is never a metric. Five year period in rule is all that they have to woo the voters to get them in again. Commonsense is considered unreliable for this and statistics of growing demand proves very useful. Growth rocks! Development sucks. Long live GDP!