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INDIA: Brakes Applied to SUVs – ‘Socially Useless Vehicles’

Ranjit Devraj

NEW DELHI, Dec 4 2010 (IPS) - Indian owners of sports utility vehicles (SUVs) and luxury cars, who have been benefiting from subsidies on diesel meant to help farmers, may soon have to pay real prices for their fuel.

After years of campaigning for a rational fuel policy, green groups and non- government organisations (NGOs) see hope in several statements made by India’s environment minister Jairam Ramesh against a massive price distortion.

“We introduced the (diesel) subsidy for certain economic purposes but have ended up with a wholly different purpose…,” Ramesh said last month, describing SUVs as “socially useless vehicles”.

“You can buy what you want, we can’t determine what vehicles you can buy. But we can certainly formulate a fiscal policy which discourages the use of heavy vehicles, SUVs and so on,” Ramesh warned as the government prepares for its March 2011 budget.

Ramesh did not elaborate, but when the government freed petrol prices from its control Jun. 25, it had deferred deregulation of diesel prices to a future date, considering the sensitive nature of a fuel that is regarded as an important farming input.

Anumita Roychowdhury, associate director at the well-known NGO Centre for Science and Environment (CSE) told IPS that she expected that Ramesh’s statements to translate into a “strong policy initiative before the next budget.”

Roy said although SUVs and big cars threaten energy security, the environment and public health, they are increasingly popular in the Indian car market and currently account for 36 percent of automobile sales in the country. “It is disturbing to see the car industry massively scaling up diesel car production capacity.”

Studies such as those by the International Council on Clean Transportation have shown that a 10 percent increase in large vehicle sales, for a given fleet, can roughly translate into a two percent deterioration in fleet fuel economy.

“This means an additional 17,500 barrels of oil will be consumed annually by each 10 percent increase in large vehicle sales,” said Roychowdury, an expert on automobile fuels. “There is no reason why the government should shoulder the burden of what is essentially luxury consumption, and then there are environmental and public health considerations.”

A CSE campaign had led to the Supreme Court ordering diesel-run buses and taxis plying in the national capital to convert to compressed natural gas (CNG) by 2001. But the steady “dieselisation” of the private car fleet now threatens to reverse those gains, Roychowdhury said.

“Diesel available in India is dirty and data from Europe shows that the diesel cars’ toxicity becomes comparable with petrol only when fuelled with near zero sulphur fuel, and (the cars) are fitted with particulate traps,” Roychowdhury said.

The International Agency for Research on Cancer, the World Health Organisation and the United States Environmental Protection Agency are among bodies that have classified diesel emissions as potentially carcinogenic.

Although diesel is considered to be an efficient fuel with lower heat-trapping carbon emissions, there is now recognition that carbon soot from diesel vehicles is involved in global warming.

Brazil, a country often compared with India, has banned diesel-run cars so that they do not take advantage of lower taxes on diesel fuel. In Denmark diesel cars are taxed higher to offset lower prices of diesel fuel.

For budgetary purposes the Indian government can either allow market pricing of diesel as happened with petrol in June, or else place a higher tax on sales of diesel-driven cars – though this would naturally be opposed by the automobile industry.

The government has already ruled out a dual pricing mechanism for diesel because of administrative costs to ensure that diesel meant for farmers is not diverted for automobile use.

“Ideally the policy should be to levy higher taxes on both diesel fuel and diesel cars to prevent use of cheap and poor quality diesel in cars and encourage people to consider cleaner alternatives such as CNG,” Roychowdhury added.

The Society of Indian Automobile Manufacturers (SIAM), the apex industry body representing 44 leading vehicle and vehicular engine manufacturers in India, prefers the market pricing of diesel rather than additional taxes on diesel-run automobiles if there are policy changes in the offing.

Speaking with IPS, Vishnu Mathur, director-general of SIAM, said that “capital costs on the manufacture of diesel cars were already high, and diesel fuel attracts high excise taxes. In actual fact there is no subsidy on diesel.”

Mathur also pointed out that a large percentage of SUVs was actually sold in the rural areas where their use was justified. “We have long encouraged the market pricing of fuels and rationalistion of policies on fuel pricing.”

India’s petroleum ministry, which decides fuel pricing, has shown disinclination to deregulate diesel prices, fearing that a rise in market prices would have a cascading effect on prices of all goods.

India’s pro-liberalisation government is trying to shake off an image that its policies favour big business over the interests of ordinary citizens.

“What we are concerned with, at the moment, is that the next budget ensures that there is no tax differential between diesel and petrol prices – as in China,” Roychowdhury said. “There should also be no incentive for people to buy diesel-run SUVs or luxury cars and add to urban pollution.”