No Cess Please ! - My solution for rising fuel cost.
Indian oil cos are bleeding. International crude oil prices are going up and Indian companies are not allowed to increase the Price on ground that "Left Front" is unhappy. Who could be better enemy of India then left, as this exercise will give them no incentive to server and increase the capacity.
But even Left has their point, if Oil prices increase then this will largely impact the poor people, as the transportation of goods will increase, but if they don't raise the price then People will continue to drive their way while making Indian oil cos uncomfortable. Government came up with another solution to burden middle class with Cess, which doesn't sound to be a good option.
Probably what had been the hurdle in India growth story seems to be another case here, lack of innovative Ideas and poor implementation.
So what could be the better solution ?
Following are my two paise to solve the issue.
What makes more economics sense at this point keeping environment in mind is to discourage people to use oil for luxury, encourage them to use public transport. Levying tax would affect all irrespective of whether they really use vehicle or not.
Hence government should set prices at different level. Usually in tier-II and below cities work distance is not more than 10 Kms, which is about 300 KMS a month, added to that another 100 KMS of drive for other activities (to buy food items etc). Hence a total of 400 KMS. Ideally for initial 300 KMS they should be encouraged to use vehicle which gives more mileage, hence approx 40 Km / lt, anything above that should be considered luxury. And for car for the rest 100 KMS, around 10 Km/lt. So the average mileage is 32.5 (weightage average), so the fuel consumption would be around 12.30 or say 13 lt per month. Hence the person should be given only 13 lt oil at subsidized rate, rest should be allowed to pay at the market price + premium. Similar case can be defined for the other cities. Moreover subsidy should be given only to public transport and carrier transport.
1). This would reduce the burden on government.
2). It will help in turning people to use public transport more than personal.
3). It will result in lesser demand for fuel (unless some richy rich are ready to pay huge amount) and hence will result in less pollution.
4). It will provide incentive to vehicle manufacturers to build fuel efficient cars.
Hope government read this and understand some of the basic things which can be done to improve the situation.
But even Left has their point, if Oil prices increase then this will largely impact the poor people, as the transportation of goods will increase, but if they don't raise the price then People will continue to drive their way while making Indian oil cos uncomfortable. Government came up with another solution to burden middle class with Cess, which doesn't sound to be a good option.
Probably what had been the hurdle in India growth story seems to be another case here, lack of innovative Ideas and poor implementation.
So what could be the better solution ?
Following are my two paise to solve the issue.
What makes more economics sense at this point keeping environment in mind is to discourage people to use oil for luxury, encourage them to use public transport. Levying tax would affect all irrespective of whether they really use vehicle or not.
Hence government should set prices at different level. Usually in tier-II and below cities work distance is not more than 10 Kms, which is about 300 KMS a month, added to that another 100 KMS of drive for other activities (to buy food items etc). Hence a total of 400 KMS. Ideally for initial 300 KMS they should be encouraged to use vehicle which gives more mileage, hence approx 40 Km / lt, anything above that should be considered luxury. And for car for the rest 100 KMS, around 10 Km/lt. So the average mileage is 32.5 (weightage average), so the fuel consumption would be around 12.30 or say 13 lt per month. Hence the person should be given only 13 lt oil at subsidized rate, rest should be allowed to pay at the market price + premium. Similar case can be defined for the other cities. Moreover subsidy should be given only to public transport and carrier transport.
1). This would reduce the burden on government.
2). It will help in turning people to use public transport more than personal.
3). It will result in lesser demand for fuel (unless some richy rich are ready to pay huge amount) and hence will result in less pollution.
4). It will provide incentive to vehicle manufacturers to build fuel efficient cars.
Hope government read this and understand some of the basic things which can be done to improve the situation.
posted by Ashish Khandelwal at
5:02 AM
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