IEA insists India should do away with fuel subsidies

The Paris-based International Energy Agency (IEA) has suggested that India should phase out fuel subsidies in order to moderate demand. The IEA and some other similar organizations have been saying that the recent worldwide increase in the prices of fuel is largely due to increased demand in countries like India and China. They’ve also said that these countries’ policies for subsidizing fuel are to blame for fuel price hikes.

On its part, OPEC says that Asian countries are not to blame for the price hikes. Instead, says OPEC, it’s market speculators and the weakening dollar which are responsible for the record rise in oil prices, which touched US$147.40 a barrel in July this year.

IEA, however, continues to insist that India should do away with fuel subsidies. ‘What is necessary is to have a policy of phasing out price controls and subsidies. This is very important to have an impact on demand,’ says Nobuo Tanaka, executive director, IEA.

We’d say Tanaka san should not stick his nose in other people’s business. And to reduce the worldwide demand for petrol/diesel, may we suggest, Tanaka san, that it’s you who should set an example: Start with leaving your car at home, and ride a bicycle to work…

In the meanwhile, the Indian government is doing its bit to try and mitigate the fuel situation. The Union Cabinet has approved a policy that aims to achieve 20% biofuel blending (for all fuel used for automotive purposes) in the country, by 2017.

The Cabinet also plans to make 10% ethanol blending in petrol mandatory from the 1st of October this year, though with the necessary infrastructure not in place, it remains to be seen whether this can really be implemented.

The national policy on biofuels also proposes that no taxes and duties be levied on biodiesel, encourages free movement of biofuels within all Indian states, and ensures a minimum price for biofuel producers. This minimum purchase price for biodiesel would be linked to the prevailing subsidised diesel price.

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