systemhalted by Palak Mathur

Isn't using subsidized diesel for private cars a luxury?

With the price of crude oil rising high and putting pressure on economy is it right to use diesel when it is subsidized to reduce the cost of transportation to maintain the  supply of essential commodities to the comfortable levels?

We have been witnessing a high rate of inflation for a long time now. One of the factors responsible for this high rate of inflation is the volatility in crude oil price. Price of crude oil price has risen tremendously, came down, and rose again. With the crisis in the Arabic world, this trend is likely to continue and the prices of crude oil are expected to remain high. This in turn may be an alarm for the world economies.

Petrol prices have been liberalized and deregulated while the diesel is still subsidized and regulated. So, automatically, petrol prices are higher than diesel prices and people tend to buy diesel cars to curb their fuel bill. But the question is - With the price of crude oil rising high and putting pressure on economy is it right to use diesel when it is subsidized to reduce the cost of transportation to maintain the  supply of essential commodities to the comfortable levels? Isn't it a luxury to use diesel for private cars? Certainly it is!!

We need to understand the rationale behind the subsidy on diesel. It is to make sure that transportation costs are less and essential commodities are available cheaply in the market so that the inflation can be contained. But with the current trend of crude oil prices, it is unbearable for the government agencies to maintain a status quo whenever there is a price rise. Government hikes the petrol price in phases but the price of diesel is regulated and subsidized with only marginal increase in its price.  The government wants private parties to use petrol cars so that the losses incurred on the petroleum products are reduced and it is able to subsidize essential petroleum products like LPG, diesel, Kerosene oil, etc. But if we use diesel for private vehicles then the government is still incurring losses and in turn it is hampering the economy, raising inflation and hampering ourselves as well. So, shouldn't we use petrol cars and vehicles for our private use? Yes, we should.

The government can pass a government resolution or legislation to stop the production of diesel cars, etc., but post -1990-91 liberalization, this is not the role of the government. It can have its setback to the economy that is beyond the scope of this discussion. The government should act as a regulator and it is trying to do its work sincerely.

So, the only option available is to show restraint ourselves and stop buying and using diesel cars for private use. This will help in reducing the number of diesel cars that are manufactured and only that number of diesel cars will be manufactured that would be extremely necessary. This way we can help government make fewer losses on petroleum products and continue with the subsidy on essential petroleum products, helping the government to progress further on the path of inclusive growth.

Behaviour   Economy   India