Monday, May 26, 2008

India's Oil Crisis

Every country in the world is facing oil crisis. In India is is particular severe because it is has become unnecessary political tool in the hands of communists. I think the problem can be solved and it is really not as severe as it has been made out to be. I did some calculation and I believe there is a small group of "poor" people that probably need to be subsidized while others are unnecessarily reaping the benefit of this subsidy.

Diesel is subsidized more than petrol in India while all the Mercedes and many other brands of luxury cars run on diesel. I think this needs to be stopped right away. Also anybody who can afford a luxury car or a luxury taxi needs to pay for real fuel charges and in case of luxury taxi services these charges need to be passed on to end customers.

So here is my plan. The fuel prices should be set at realistically market price levels and specific mechanisms should be designed to provide subsidy to needy sections. For example, farmers running tractors (not the guy using tractor to pull equipment on airport) can have a set quota of diesel that is subsidized on a daily basis. Similarly assuming that auto rickshaws may be used by poorer sections of society, direct subsidy can be given to these. This can be administered through automated systems like credit/debit cards.

Better still, everybody who wants discounted fuel should be asked to get a PAN card (this seems to be most systematic identification system that we seem to have today) irrespective of them filing returns. Once you use subsidized fuel, you should not be allowed to purchase a car. The logic being that if you can afford the car, you better afford the fuel.

If the so called middle class wants to vote the government out of power, so be it. They have to pay for what they use. Currently, just because this section is capable of making more noise, they are heard about many sections of society which are more needy. I did not hear so much noise even when thousands of farmers were committing sucides.

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