RailEnquiry

Which segment of the Indian economy gets the largest share of the diesel subsidy dole offered by the Union government? Not farmers, not Indian Railways — it is the commercial goods transport sector, largely in private hands, that accounts for a little over a third of the total subsidy benefit.
The subsidy regime ensures the fuel is priced at Rs 41.29 a litre (price in Delhi), a discount of 22 per cent on its market-determined price. While truckers account for 38 per cent of the subsidy bill, passenger vehicle owners have a much smaller share, of seven per cent, though this has risen of late, due to a robust growth in the sales of diesel-run vehicles for passenger transportation, due to the fuel’s lower price. Their sales grew 35 per cent in 2011-12, compared with a 15 per cent decline of petrol-run passenger vehicles in the same period.
Within the transport sector, which accounts for annual diesel consumption of a little over 40 million tonnes (see table), the share of Indian Railways has declined. It is now estimated to consume only 10 per cent of all the diesel sold, largely because of the rapid growth of electric locomotives in the past several years.
State transport utilities, too, have seen their share stagnate at around 10 per cent, as many state transport undertakings have switched to the lower-priced compressed natural gas, considered more environment-friendly.
In sharp contrast to the transport sector, agriculture accounts for a relatively small share of 12.3 per cent in the total diesel subsidy kitty. It is followed by power and manufacturing with eight per cent each and the auto-rickshaw sector with three per cent.
Diesel use in agriculture is largely propelled by the use of generation sets for pump irrigation.
According to data compiled by Business Standard, the subsidy component for diesel (calculated as the difference between the current administered price and the market-determined price) is estimated at Rs 85,000 crore, based on 2010-11 consumption. The transport sector alone takes away Rs 57,500 crore.
Arguments given in favour of not raising diesel prices are that such a move would be inflationary. “If diesel prices go up, truckers will pass on the cost and the end-user of goods will bear the burden. So, by protecting the truckers, the government is trying to protect the consumers,” said Madan Sabnavis, chief economist, CARE Ratings.
However, it is not that truck rentals have not been moving up despite a stable diesel price since June 2011. While the price has risen by 8.4 per cent between April 2010 and now, truck rentals have increased 30-35 per cent. In the past year alone, the rentals saw a jump of a little over 10 per cent when no diesel rise occurred. Consequently, prices of various edible commodities have also been impacted.