Best solution to namma trafficu!

Making fuel expensive for private vehicles is a very basic step to restrain use, with hikes in costs for petrol with removal of subsidies. Increase in LPG costs for domestic /commercial use may also be accepted without too much discontent.

However, removal of subsidies for diesel & kerosene might not be all that easy since prices for basic commodities will shoot up. The answer is perhaps to retain subsidy for distribution of basic commodities such as rice, sugar, etc. through PDS for legitimate ration-card holders & go ahead with removal of all subsidies for all types of fuel (incldg diesel & kerosene).

Diesel for city public transport, inter-city bus corporations & for railways can also be subsidized, but it will have to be in a round about way to avoid pilferage (such as bus corporations /railways filing for returns annually based on total consumption after paying up full costs through the year). Cost of travel by autos & taxis will also become dearer, forcing most of the public, including private companies' employees to resort to public buses. Bus & rail fares can be controlled with subsidies, though some price rise will occur due to the quantum of interests on the additional money blocked.

One option to meet costs of these subsidies is to hike fuel costs & tax private vehicles more than just needed for removal of subsidies - this will help further to reduce vehicle volumes.

The resultant price rises will effect the urban middle classes most & there is bound to be an uproar, but if this were cleverly planned in phases, it might eventually work.

There is bound to be a mad rush for ration cards & corruption would probably increase, but methods would have to be found to ensure that subsidy reaches only those in needy. So far, methods employed for doling out subsidies have been inefficient & subsidies are reaching those for whom it was never meant.

Srivathsa,

Taxing diesel cars higher at purchase (or annually, if vehicle taxation is changed back to annual, preferably), or removal of subsidy for diesel for car use might work to some extent, but it will also have it's own problems & inefficiencies. For example, prices for diesel cars will go up by something like 3 lakhs over it's lifetime - this might not be acceptable to diesel car makers & users (such as private businesses) easily, & will add to inflation. If subsidy for diesel for only cars is removed, it would encourage a black market for subsidized diesel.

Kerosene can be made available at subsidized rates through PDS for bonafide ration-card holders. It can also be made available openly in the market at unsubsidized prices. This way, the needy will probably save a lot or even make some money through their sources from PDS, & this is better than the current leakage of benefits to those that never deserved it.

There is bound to be some inflation, but as you mentioned, how long are we going to keep this game going ? If cost of living can be kept under control for the needy, I think it would suffice whilst the urban middle & upper-middle classes will start paying the true costs for their lifestyles - this had to start at some point.

Respected Sir,

I do agree HIGHER FUEL PRICES will bring down FOUR wheeler usage.

It is likely that it may increase two wheeler use, which again is not very desirable.

THANKING YOU,

SHAFI MULLA

 "it is very difficult to get a man to understand something if his salary depends on not understanding it".  This is the current state of our public, industrialists and politicians.

I don't if our politicians really think that oil prices are going to come back the $25 level and hence they can fend off this current high price regime using subsidies and then make up the deficit later.  This is not going to happen.  If oil prices come back to $25 it will mean that we are in a second great depression.

Swami is correct on oil fields.  Almost all the oil fields in the world are in decline.  We use 30 billion barrels of oil each year.  And the media makes a big deal when we find a field that might have 1 billion barrels.  That is 12 days of global consumption.

However $200 may not sustain.  There might be a couple of spikes to that level which will crash the economy each time.  Volatility will the distinguishing feature of the next decade.

Recently the CEOs of Petrobras and Total have come out publicly and said that they don't see oil production ever crossing 90million barrels a day.  China is using its reserves to buy long term contracts directly with producing countries bypassing NYMEX.  It should give us a clear warning that the writing is on the wall.

Srivathsa

You know interestingly where the story lies? 

Here

"In 2009, in part to combat the global economic collapse, the national government halved the sales tax on the small-engine cars that most first-time buyers choose, and it spent billions on subsidies for rural car purchases and upgrades to new vehicles" . 

and here

"Part of the problem is poor planning. Curiously, a city of more than six million drivers has virtually no stop signs, turning intersections into playing fields for games of vehicular chicken. Freeway entrance ramps appear just before exit ramps, guaranteeing multilane disarray as cars seeking to get off try to punch through lines of cars seeking to get on."

Of course congestion charging will not be approved by the communist party because illogical ideology. But nevertheless the story for us is in the 2nd part. That of trying to grow without basics of traffic engineering in place. If we let BBMP plan our streets we will be in a much bigger mess than China is in. 

Bangalore incidentaly is far behind most Indian cities in enabling sustainable transportation. All metros including Hyd have commuter rail for decongestion, Delhi & Pune have Bike share already operational for last mile, Delhi, Ahmedabad & Indore already have BRTS for Bus priority.

 what subsidy are you talking about?

The article is talking about China. You are on the wrong planet.