With generous dispensing of cheap diesel to rich car owners, the government has finally turned the market around. Media is abuzz with the Petroleum Planning and Analysis Cell’s report. It says the diesel consumption growth rate at 6.4 per cent has outstripped that of petrol at 4.5 per cent. Petrol price hikes have made the fuel price gap gape wider and add to diesel’s lure.
The mindless race for diesel cars for the cheap run for money has skewed its sales. Its share in new sales has jumped from 4 per cent to close to 40 per cent in 10 years. In the popular compact car segment, its share is already 50 per cent. Cars are now the second largest diesel guzzlers—more than buses and agriculture.
The government’s generosity abounds as it willingly shoulders mammoth revenue losses to support this luxury consumption. While it earns Rs 14.35 a litre from excise on a litre of petrol it settles for a mere Rs 4.60 per litre of diesel. It also disallows full recovery of the market prices of diesel and graciously shares this cost burden with the oil marketing companies.
Diesel's health risk
At stake in this gamble is our health. The government refuses to acknowledge the health risk of diesel sold in India. The World Health Organization (WHO), the International Agency for Cancer Research, the California Air Resources Board and the US Environmental Protection Agency have branded diesel particulates as toxic air contaminant and human carcinogens. These cause lung cancer and even kill unborn foetuses.
The cancer potential of diesel particulates is several times higher than that of some of the worst known air toxins. It can cause 300 excess cancer cases per million people exposed to one microgramme per cubic metre concentration over a 70 year period. In contrast, this number is 170 for one of the worst known toxins—1,3-Butadiene. Diesel cars also have the legal license to emit more particulate matter and nitrogen oxides that are choking our cities. Other governments consider these risks before taking a decision.
But our officialdom is content to trade cancer for profits of the auto industry. It has not even set the next level of emissions standards to clean up diesel fuel and technology that in most parts of India is lagging ten years behind Europe. More diesel cars will lace our breath with more toxins. Studies in Delhi have shown high share of vehicular fume in our breathing zone.
So far, the government has disregarded all advice from our economic pundits to tax diesel cars higher to offset the incentive of cheap diesel fuel. The Heavy Industry Ministry and its minister have actively lobbied against any disincentive for diesel cars. The government has simply lost the courage to tax the ambitions of the car industry. Only Delhi has dared to create a pollution control fund through an environment cess on diesel fuel and by slapping higher road tax on diesel cars.
Restrain diesel cars or give clean diesel
Global governments have also acted. Brazil actively discourages diesel cars because of the policy to keep taxes lower on diesel. Denmark taxes diesel cars higher to offset cheaper diesel prices. In China, taxes do not differentiate between petrol and diesel. Sri Lanka has reduced diesel car sales dramatically by slapping very high duties—close to 300 per cent.
The car industry defends itself saying diesel cars are increasing in Europe. But they hide the fact that Europe has already moved to advanced emissions control technology to near eliminate diesel particulates and uses diesel fuel with 10 ppm sulphur. In India, we need clean diesel too, not just for cars but for buses and trucks as well.
But our government will not ask the refineries to produce clean diesel. Under-recoveries are blamed for restrained investments. Yet maximum refinery capacity expansion in India has coincided with the highest oil prices and under-recoveries in toe. The refining capacity will further expand by as much as 41.8 per cent between 2010 and 2013. Why is this investment not linked with clean fuel targets? The refineries cry foul over an additional cost tag of Rs 40,000 crore to remove sulphur from fuels. But only one metro system hogs nearly as much in one city like Delhi. But clean fuel at the same cost can benefit all citizens nationwide. This extra cost can also be fully recovered from additional excise tax on diesel cars in less than five years.
Solutions exist. But profits get priority over our health.