Should petroleum subsidies be ended?
Should petroleum subsidies be ended?
Introduction
Though petroleum subsidies were provided in the interests of the nation and the industry, it is time to remove these welfare measures. There are huge disadvantages in continuing with petrol subsidies in the current scenario. Ending petrol subsidies will ensure that people become more oriented towards other alternatives such as natural fuels. This is good for the environment as well. Moreover, petrol is a non-renewable source of energy. Subsidizing it will make it a popular choice and create a dependency among the public for this precious natural resource. It is better to end petrol subsidies and let people bear the actual cost of fuel rather than sustaining heavy losses to the national exchequer on account of this.
Viewpoint
• Current petroleum subsidies are affecting the integrity of the central government budget. Petrol subsidies have implications for the energy consumption patterns in India and for investment in India’s oil and petrol companies. In fact, excessive petrol subsidies will threaten India’s macroeconomic stability.
• The fragile condition of the public sector oil and petrol companies is also a cause for concern. Selling subsidized petrol and oil products is eating into the profits of these companies. India can never progress if its PSUs continue to be sick or perform below par. State resources are precious and excessive concern for the common man can mar the chances of boosting economic growth.
• Populist measures such as control of petrol prices through subsidies cannot be sustained for long if the government continues to operate at a loss. It becomes very difficult for the government to function effectively if there is a lack of funds. While social welfare measures are not wrong, the most benefits of these subsidies are being derived by rich industrialists and not the common man.
If there are serious concerns regarding how the common man will manage if petrol is highly priced, instead of imposing general subsidies on petrol, this fuel should be available at cheap rates only to persons of the lower socioeconomic strata and small businesses.
• Large business houses often lobby for lowering of fuel price as they hope to capitalize on cheap resources. As a result, they make huge profits which do not benefit society at large, except through a few CSR projects. Subsidies are meant to improve the lot of the common man only. Industries can be given certain incentives regarding the price of petrol if they promote certain social welfare measures only. The amount of advantages they get should be commensurate with their services to society.
• The impact of fuel subsidies on the state owned companies that are bearing the burden of this move is also disheartening. Moreover, prevailing political conditions such as those in Sudan in Africa are also adding further to the woes of stalwart companies such as IOC.
Conclusion
In the present economic and social scenario, petrol subsidies are not a good move anymore. While it is important to consider social welfare, it cannot be denied that the conservation of the state’s resources is equally important. If the state continues to bear the burden of a fuel price subsidy over a prolonged period of time, it will weaken in power, authority and economic standing.
The state is formed for the welfare of the people. It is not formed to promote interests of select businessmen and large companies only. Subsidies should be based on the paying power of the citizen and they should be commensurate with the income level of the buyer. As such, petrol subsidies should be ended if the state wants to make any real progress.
Discussion
- Should petroleum subsidies be ended? -Farhana Afreen (04/03/14)
Should petroleum subsidies be ended?
Subsidies in petroleum were meant for the facilitation of both poor and rich alike towards a better living. However, Subsidies are harming more than benefitting any country including India. For the spread of wealth which happened to be the motivation behind the policy of subsidizing oil, it was meant to ensure that the hike in prices of petrol does not affect the poor half of the nation. Prices have soared high in International market and subsidies are still being given at a higher level in our country which is the reason for losses that the companies are facing. Subsidies seem to hurt both rich and poor alike along with the harm being done to environment.
Poor people are only benefitting a small proportion of the policy and are being troubled to a greater extent. Usages of high consuming vehicles are more amongst the riches compared to the poor half. Similarly for fuel, the richer population are the mostly benefitting ones from subsidies. The consumption amount is also higher at their end compared of the poor households where cooking is mostly done using kerosene as fuel. Electricity consumption for cooking is also higher in richer households compared to the poor families. Hence, the excuse for subsidizing the prices for the poor is absolutely not understandable.
It is agreeable that the underprivileged families that consume petroleum shall suffer if subsidies are stopped. Government can then make policies that include subsidies only for those that require them like the poor or mediocre families. Giving subsidies to the richer half is absolutely a waste and a loss that can be mended without hurting much.
Fuel subsidies consume government budgets of funds that could otherwise be used to benefit the poor in a more particular way. The same finances that are wasted on fuel subsidies could be used to support on education, health, or other programs more resourcefully meant for the poor. This would be more beneficial for the poor rather than subsidies on petroleum which is more of a help only to the privileged half that can own their own vehicles.
Richer population might think that they are benefitting from subsidies in fuel but there are ways that are harming their funds as well. When the government runs on loss due to excessive subsidy in petroleum exported from other nations, the only payment they can use if of the taxes that are paid by the richer population of the country. The next time you have a question in your mind about the whereabouts of the taxes that you are paying to the government, you might want to consider this way.
Traffic obstruction and air pollution are also the side effects of fuel subsidy. For a short distance that can easily be covered by walking, we prefer using vehicles just because they are easy and affordable. This would not be the case if the prices were high. The low earning population of the country still prefers to use public transportation means like buses and trains while the richer half would not come out of their cars even if their office is only at a distance that takes 20 minutes of walk. Ending petroleum subsidy will surely reduce the number of cars and bikes on the road doing a great deal of favor to the environment.
Subsidies are in many ways accountable for lower economic growth of the nation. Country can invest the amount in other trade or for the development of the nation or for the advancement of the poorer half of the country. Subsidies are doing far more harm that any good and therefore it should be ended for the betterment of the country.
