As with climate change, everyone feels the effects of higher fuel prices but not everyone is responsible for the problem. The recent hike in the price of petrol falls in the same category. It has been absorbed by the upper crust of India’s motoring masses, although those beneath the surface who must ride to work everyday will feel its impact more.
This report published by Reuters points out that despite the hike in petrol price, there is no perceptible reduction in demand. Figures published by the Paris-based International Energy Agency show that India consumes about 12.3 million tonnes of fuel in a month and demand will actually rise in the current year by 1.9 per cent.
The factors contributing to the rising demand – a vicious circle of forced automobile dependence and lack of investments in alternatives by Governments – are generally ignored in comments on national fuel pricing policy. To its credit, it is the IEA that has taken note of the aberrant (and unsustainable) consumption pattern in a populous country and forecast stabilised demand in the future, together with emphasis on efficiency, more rational use. That will happen as the price equation gets even more unfavourable to the user.
Business Standard in its editorial makes a valid point about the lopsided nature of fuel pricing, although it could have gone the whole distance and called for differential pricing for non-transport diesel vehicles. What is interesting is that petrol forms only 20 per cent of fuel consumed, while it is diesel that makes up over 50 per cent. To be sure, there is a case to provide subsidised diesel for public transport and for goods movement, since unbridled pricing can have disastrous economic consequences, but why should diesel SUVs be given cheaper fuel?
So will there be a change in the way government looks at demand-supply of automotive fuels judging from the unhappiness among voters? It is evident that someone will have to pick up the tab when fuel prices rise, and the shortfall made good mostly using tax funds. It would be sensible to tinker with the demand side of the equation, by expanding alternatives for mobility in urban centres. This can be done by taxing the use of diesel where it serves private interests, and petrol. The infrastructure built with such funds will be green and pay for itself over the long run and curb inflation, enabling at the same time, mobility, boost both trade and culture.