Diesel: when bad policy makes for toxic hell – by Sunita Narain

Just consider. Every time petrol prices are raised, oil companies end
up losing more money. Simply because the price differential between
petrol and diesel increases further, and people gravitate towards
diesel vehicles. More the use of diesel, more the oil companies bleed.
Worse, we all bleed because diesel vehicles add to toxic pollution in
our cities, which, in turn, adds to ill health and treatment costs.

This is very well understood. Yet nobody will do anything to fix the trend.

Today, it makes more sense for the next car buyer to buy an expensive
personal car—perhaps even a Mercedes-Benz—but run it on the subsidised
diesel. Today, according to government’s own estimates, the use of
diesel in personal vehicles has zoomed. Some 15 per cent of the
current consumption of diesel is in passenger cars. The agricultural
sector uses less—12 per cent of the country’s diesel. This busts the
myth that diesel prices are kept low for reasons of
public policy. In fact, keeping the price low but allowing its use in
the private transport sector is clearly a deliberate policy to use the
poor person’s fuel to subsidise the rich.

Oil companies also say that the under-recovery in diesel is now
costing them big time. It is estimated that Rs 67,500 crore is lost
annually in under-recovery on account of diesel alone. This is roughly
60 per cent of the total losses of the companies. Assuming that
private cars consume 15 per cent of the diesel, the direct subsidy to
car owners is over Rs 10,000 crore. This is socialism Indian style:
taxing the poor to pay the rich. With each increase in the price of
petrol, this gap widens. Bad for oil companies; worse for the
environment.

The claim of car companies that the modern diesel vehicle is clean is
far from true. Emission data shows current diesel cars emit seven
times more particulates and three to five times more nitrogen oxides
than petrol cars. There is sufficient evidence that tiny
particulates—PM 2.5—emitted from a diesel vehicle are toxic and
carcinogenic. This toxin is firmly associated with significant
increase in cases of asthma, lung diseases, chronic bronchitis and
heart ailments. Long-term exposure can cause lung cancer. The
increased level of nitrogen dioxide contributes to the formation of
ozone, which, in turn, damages our lungs. So be clear, diesel
vehicles, however fancy and fitted, are costing us our health.

Today, Europe, which promoted diesel vehicles, is paying a heavy cost.
It is struggling to meet air quality standards, even though it has
invested heavily in the cleanest of fuels reducing sulfur levels to
near-zero and has fitted vehicles with every kind of anti-pollution
gizmo like particulate traps and de-NOx catalyst. Diesel also has
higher levels of black carbon, which is today understood to be a key
contributor to climate change. In the US, the car mecca, where
emission standards and price do not differentiate between fuels, there
is no market for diesel cars.

So why does Indian policy continue to provide this perverse incentive
to pollute? The irony is that there is no policy that allows this use.
It is a loophole. Car manufacturers struck gold when they realised
that they could sell more vehicles if they could run them on cheaper
and subsidised fuel. They exploit the fact that diesel price is kept
lower because of its use for transportation of essential goods and for
public transport—trucks use some 37 per cent of the diesel consumed
and buses 12 per cent. They also know that dual pricing of
fuel—different diesel prices for cars and buses or tractors—cannot be
operated. They merrily exploit this helplessness.

Government agencies know this. They make all the right noises about
the need to fix the price distortion. The market types glibly talk
about the need to deregulate diesel. They say this because they know
that even though they sit in power, they cannot remove government
control over the price of this fuel, which is also essential for
railways, transport of public goods and agriculture. They know that
the inflationary impact of raising diesel price will be high; they
know it will be opposed. But they use this convenient cover to do
nothing about the most glaring of distortions—the use of the
subsidised fuel by the rich and for private transport.

But given the rising economic cost and pollution, the option of doing
nothing is not acceptable anymore. The options are either to link the
price with emission standards or to ban production of personal diesel
vehicles. If this is not possible, then the government should tax
diesel vehicles—200 to 300 per cent of the price of the vehicle—to
remove the fiscal distortion in price and policy. Our neighbour Sri
Lanka has done so. In India, committee after committee has recommended
that this be done. But it is not done.

Clearly, the lobby for big diesel is powerful. Clearly, it sits in
glitzy chambers of commerce, which can bend policy to suit purse and
purpose. It’s sad and deadly.