Professional Documents
Culture Documents
One Example
A two-wheeler consumes, on an average, 86 litres of petrol per year, for which the owner spends Rs. 320 per month (Rs. 510 in Delhi). The fuel expenditure of car owners is much larger at Rs. 2210 per month (Rs. 4140 in Delhi). Motorized vehicle owners are largely well-off persons belonging to the upper two/three deciles of the population. There is no reason to subsidize this class of consumers. Full price pass-through at US $ 80/bbl will increase the retail price of petrol by around Rs.7/litre. The additional expenditure of a two-wheeler owner would be only Rs. 50 per month (all-India average). If higher petrol prices lead to less driving, more fuel efficient vehicles and an efficiency increase by 20%, the additional cost would be that much less. Parikh Committee believes that the cost increases can be borne
by motorized vehicle owners and recommends that petrol prices should be market-determined both at the refinery gate and retail levels. Diesel
Out of total Diesel consumption in India see this pie-chart to know who uses how much of it-
mrunal.org/2010/02/economy-4-newbie-petrol-diesel-lpg.html/print/
1/6
7/2/13
7/2/13
also be market determined both at the refinery gate and retail levels.
And finally, LPG
LPG Cylinders
Subsidy situation
LPG consumption is growing and global price is also expected to increase, the subsidy burden will keep growing. This is not a sustainable situation. Normally, a subsidized product ought to be given in limited amounts. However, domestic LPG is both heavily subsidized and available in
unlimited quantity. The burden of subsidy can be reduced by either raising the price or reducing the quantity or both.
mrunal.org/2010/02/economy-4-newbie-petrol-diesel-lpg.html/print/
3/6
7/2/13
the capacity to pay the market price for LPG and will use LPG even when the price is raised.
Since providing universal subsidy through price below the cost misdirects the subsidy to the relatively affluent, a strong case can be made for subsidizing LPG as a clean cooking fuel for the poor.
7/2/13
womans needs may get a lower priority, and on the merit good nature of LPG use. The intra-household distribution problem can be addressed to some extent by transferring cash to the account of woman of the household
raise the price. As we so ago- even with smart card- you give cheap LPG theyll go in wrong hands so youve to give direct cash transfer to poor not cheap LPG.
7/2/13
of Rs. 262/cylinder in 2003-04 is estimated to be Rs. 485/cylinder in 2009-10. Another way of assessing the level of price of LPG cylinder in 2009-10 is to maintain the percentage of LPG subsidy in the price of 2003-04.
increase the price of 14.2 kg LPG cylinder by at least Rs. 100 per cylinder.
Thereafter, the price of domestic LPG should be periodically revised based on increase in paying capacity as reflected in the per capita income. The subsidy on domestic should be discontinued for all others except the BPL households once an effective targeting system is in place. As a clean cooking fuel, LPG is a merit good and subsidy to poor households may be needed and justified.
mrunal.org/2010/02/economy-4-newbie-petrol-diesel-lpg.html/print/
6/6