Indian government considers dual pricing of fuel

The Indian government gave indications that it may introduce dual pricing of fuel as a means to remove the subsidy given to car owners. Passenger cars consume about 15% of the country’s diesel fuel supply and Finance minister Pranab Mukherjee said, “We can try to work out a mechanism…so that this section is not subsidized.” This has elicited strong reactions from carmakers who said that any policy changes or additional tax on fuel would affect an already slow auto market. The industry posted the worst performance since the 7% decline in January 2009, with a 10% decrease year-on-year in July. The Indian government presently gives a subsidy of 6.08 a liter on diesel fuel. Oil Minister Jaipal Reddy said “These are all proposals that are being considered by the finance ministry. The finance minister rightly expressed concern about misutilisation of subsidised diesel for many things like power generators.” Sales of diesel cars, which account for 35% of all passenger vehicles sold in India, rose sharply over the last years because diesel fuel is 40% cheaper than petrol. It is also 30% more efficient. (September 1, 2011)