CSE welcomes and supports finance minister's move to consider removing subsidy on diesel used in passenger cars

  • Says this will check use of diesel in cars and cut toxic risk from diesel emissions. Will curb energy guzzling incited by cheap diesel and the shift towards bigger engines and SUVs

  • Will help government cap revenue losses from luxury consumption of diesel


  • Calls for immediate scrapping of subsidy for car owners. Also, for an emissions standards roadmap for the auto industry

New Delhi, August 5, 2011: Centre for Science and Environment (CSE) has welcomed and supported the move of finance minister Pranab Mukherjee to consider removing diesel fuel subsidy for diesel car owners. CSE has consistently raised its voice over misuse of public policy on fuel pricing inciting dieselisation, increasing toxic risk from diesel emissions, worsening energy guzzling from bigger diesel engines and aggravating revenue losses from luxury consumption of diesel in cars.

Says Anumita Roychoudhury, CSE’s executive director-research and head of its urban mobility team: “There are now very strong reasons and evidences to justify the need for a fiscal policy to check dieselisation of our car segment.”

Distorted fuel pricing has driven the move towards diesel in India. In the year 2000, diesel cars were only 4 per cent of India’s new car sales. Within a decade, they have increased to 36 per cent and is expected to be 50 per cent soon. According to official reports, diesel cars are already the second largest users of diesel in the country -- cars are using more diesel than agriculture and buses. Rich car owners are the beneficiary of the fuel pricing policy. Today, fuel is cheaper for a SUV owner compared to a two-wheeler owner.

Car-makers are also hard-selling diesel cars to ride on this trend. CSE’s analysis of market trends shows that the industry is introducing more diesel car models in the smaller car segments.

Says Roychoudhury: “This trend will skew further because of the flawed definition of small cars for tax purposes. Legally, a small petrol car is defined as one with length not exceeding 4,000 mm and with an engine capacity not exceeding 1,200 cc. For a diesel small car, this has been relaxed to 1,500 cc. This relaxed limit for diesel cars has enabled a large number of mid-segment diesel cars to qualify for the tax cut. This loophole must be plugged.”

Government and oil companies share the burden of subsidy for rich car owners: The government earns much less from excise on a litre of diesel used by cars, as opposed to petrol. The excise duty on petrol is Rs 14.35 a litre, while it is Rs 4.60 per litre for diesel. At the same time, the under-recovery of costs is also huge. According to official information on the product-wise under-recovery of public sector oil marketing companies, the losses in the month of May were as big as Rs 16.17 on every litre of diesel sold. In fact, diesel prices account for around 60 per cent of the under-recovery or losses of oil companies.

Fiscal policies must not run counter to the objectives of public health: Official policies are encouraging massive dieselisation of the car fleet at a time when ‘clean’ diesel (10 ppm of sulphur) and clean diesel technology (advanced particulate traps and effective NOx emissions control) are not available in the country. Even after the introduction of Bharat Stage IV fuel in April 2010, for which huge amounts of public funds have been expended, the quality of diesel available in the country cannot be termed ‘clean’. Studies in Europe show even at the level of Bharat Stage III and IV, the cancer potency of diesel emissions remains higher than that of petrol emissions. Dieselisation will add to the burden of particulate matter and nitrogen oxides, the two key pollutants of concern in Indian cities.

Car market is moving towards bigger and heavier cars and undermining energy security: Cheaper diesel fuel encourages bigger cars and SUVs, more driving and more fuel guzzling. Most SUVs run on diesel. This defeats the objective of improving India’s energy security. The auto industry’s claim of greater fuel efficiency and lesser carbon emissions from diesel cars is also unacceptable as diesel fuel has higher carbon content than petrol. If more diesel is burnt, more heat-trapping CO2 will escape. This is clearly the trend across the world.

Worldwide action against dieselisation: Countries such as China are increasing taxes on bigger cars, especially SUVs, to minimise the energy and pollution impacts of the bigger vehicles. In Denmark, diesel cars are taxed higher to offset the lower prices of diesel fuel. The Indian auto industry often sites the case of Europe where the number of diesel cars has increased over the years. But it omits to mention that Europe has already mandated 10 ppm sulphur diesel along with particulate traps.

Recently, the European Commission calculated the difference in lifetime pollution costs of Euro IV-compliant diesel and petrol cars (13 Indian cities have introduced these cars as well). The analysis shows that the total pollution cost of a Euro IV diesel car is Euro 1,195, as against Euro 846 for a petrol car. The European Commission says that this nullifies the marginal greenhouse gas reduction benefits of a diesel car.

No official roadmap yet for emissions standards for auto industry to bring clean diesel technology: After the implementation of the Auto Fuel Policy in 2010, the Government of India has not set the next target for moving quickly to Euro V/VI emissions standards. Therefore, new automobile production and investments in the country are not linked to any further commitment towards improving vehicle technology or fuel quality. This will delay the adoption of clean diesel technology in the country and add to the toxic risk.
CSE calls for urgent decisions: The public policy to subsidise rich car owners needs to stop immediately. A number of official committees have recommended additional taxes on diesel cars to neutralise the effect of cheaper diesel fuel. The Delhi government has decided to levy more tax on diesel cars. For both public health and energy security, this decision cannot be delayed any further.

For more details, please contact Anumita Roychoudhury at anumita@cseindia.org. For interviews and access to other CSE resources, get in touch with Papia Samajdar at papia@cseindia.org