Whose interest will Mr Moily protect - environment or industry?

CSE questions the CNG price hike. Says it brings CNG prices closer to that of diesel, a polluting fuel

New Delhi, December 27, 2013: Centre for Science and Environment (CSE) has slammed the recent hike in CNG prices, a fuel which drives public transport. “We would like to ask Mr Moily (Veerappa Moily, the minister who is in charge of the petroleum as well environment portfolios) why has he raised the price of a green fuel without hiking the price of a polluting fuel – diesel? This has almost destroyed the price advantage that CNG had over diesel. Who is he protecting – the environment or the industry?” asked Sunita Narain, director general, CSE.

Indraprastha Gas Limited has recently announced a steep hike of Rs 4.50 paise per kg in the price of CNG, the second successive hike in three months. CNG will now cost Rs 50.1 per kg, while diesel is at Rs 53.78 per litre. This makes the price differential between a greener and a polluting fuel much closer – removing the advantage of running a vehicle on cleaner fuel, say CSE researchers.

It is ironic, they point out, that while the fuel tax differential has been officially justified in the name of agriculture and freight, rich car owners have benefited more from it. Cars have already become the second biggest user of diesel and beneficiaries of the official fuel tax policy. The government’s own experts have recommended additional taxes on diesel cars to neutralise the effect of low-tax diesel. But the government has yet to muster the courage to impose these taxes.

Estimates show that the government incurs huge revenue losses, as it earns much less from excise on a litre of diesel used by cars, as opposed to that on petrol. These losses will increase with the growing numbers of diesel cars. At the same time, there is under-recovery of costs in case of diesel – Rs 10.48 per litre of diesel.

Says Narain: “This is leading to gross misuse of the poor persons’ fuel by rich car owners, massive revenue losses for the government, and serious damage to public health. The government’s move to raise the CNG prices will incite more dieselisation.” 

The government does not have a direct fiscal policy to promote the CNG programme in cities. In fact, the central excise duty has been rationalised to be uniform for all vehicles irrespective of the fuel they use. In anticipation of the increase in CNG prices due to price deregulation, the Supreme Court had directed the Union government in 2002 to devise a favourable taxation policy for natural gas in the interest of public health. However, a composite policy has not been put in place yet. 

CSE researchers have called on Moily for a relook at the CNG price hike, keeping into account the environmental factors. “Since the environment minister is also the petroleum minister, there is an opportunity to give primacy to the benefits of CNG and keep it competitive vis-à-vis diesel – but the minister seems to mum on this aspect,” says CSE. 

For more on this, please contact Vivek Chattopadhyay at vivek@cseindia.org / 9911791243.