Robbing The Poor
A subsidy is levied on a product to reduce its price. This means the state (read taxpayer) is paying for part of the product. This is done to meet a national objective. Diesel was highly subsidised in India to help the poor farmer run his pumpset for the purpose of irrigation. This is done with a view to maximise food production Unfortunately, the diesel ends up running cars for the very rich cities. This cheap diesel is promoting the dieselisation of the Indie automobile fleet.
In 1996-97, the total petroleum subsidy was estimated to be Rs 18,440 crore. Diesel subsidy has grown almost 20 times - from Rs 420 crore in 1994-95 to Rs 8,340 crore in 1996-97, that is, from 6.5 per cent to 45 per cent as a proportion of total petroleum subsidy. In two cars, the rate of subsidy increased from Rs 0.13 to 1.97 per litre. This lead to a spurt in consumption by 42 per cent between 1991-92 and 1995-96. This increased consumption has consequently increased the quantum of subsidy.
The dieselisation of the Indian economy has gone to the extent that the country used seven times more diesel than petrol in 1995. No other country in the world has such a diesel-petrol consumption ratio. This is just a small part of the conspiracy of silence regarding subsidies. Higher education and medical services are also highly subsidised in India. This includes premier institutes like the Indian Institute of Technology and even university education. All this has been done with a view to promote higher education among the poor. Once again it is the urban rich who corner these seats. And many of those who benefit from this subsidy don't even serve the country. They just go abroad.