Every few days, Rajkumar Sharma, manager of a group housing society in Noida, makes the mandatory trip to the nearby petrol pump to pick up his quota of diesel. A few days back, even as he was on his 'diesel duty' as he calls it, he was making some quick back-of-the-envelope calculations. "Our average monthly consumption is around 400 litres which means a monthly expenditure of around Rs 20,000-22,000. I'm sure this will now go up by at least 10-15%."
The decision to deregulate diesel prices -- in a bid to reduce the fiscal deficit -- may be a long-term gambit by the government but its short-term impact is being felt by many who are part of what is referred to as the diesel economy. This includes, besides the transport industry -- which is a major known guzzler of the fuel -- all those who depend on diesel for power generation such as shopping malls, offices, housing complexes and mobile towers. Another big user-group are the country's farmers who use diesel-powered pump sets for watering their fields.
According to data from the ministry of oil, petroleum & natural gas, almost 8.2% of the total diesel consumed in India is for power generation. Agriculture uses up 12.2% while transport guzzles up 65.3% of the fuel, with road transport itself accounting for 60.4%. "Diesel constitutes almost 38% of all petroleum products consumption in India," says Mukesh Anand of the National Institute of Public Finance & Policy."Given the profile of uses and users of the fuel, its substitution possibilities appear to be severely circumscribed."
In economic terms, diesel demand in India is regarded as inelastic with respect to price in the short term. This means that its demand does not necessarily decrease with an increase in price. Anand says that's because more than 90% of the diesel in the country is used for intermediate purposes like transport which results in the production of further goods and services."Only about 5% is being used for meeting the ultimate demand of consumers in power generation etc."
It is here that its substitution is possible which can lead to a little less dependence on the fuel which has been much derided for its particulate emissions. Many small businesses have already switched to inverters but for those who don't have an option like mobile towers, industrial units, malls etc - the reliance on diesel continues. Amit Garg, professor at IIM Ahmedabad, points out that we spend about Rs 200 crore worth of diesel to power mobile phone towers in the country. Malls, too, can't do without it. "Even in a city like Bhopal, which is not really power-starved, our diesel consumption has gone up drastically in the last few months. We consume about 30% more diesel than same time last year," says a spokesperson for Ashima Mall in Bhopal. In Punjab -- often referred to as a diesel-driven economy - the agriculture sector accounts for 1.02 lakh litres of the 2.68 lakh kilo litres average monthly consumption of the fuel largely because farmers cannot depend on the erratic power grid supply.
This is an issue that should be tackled soon, says Anumita Roychowdhury of Delhi's Centre for Science & Environment. "Diesel is not a mainstream source of power generation anywhere in the world," she says. "It is more a symptom of the problem than source of the problem. Therefore, it is important to improve energy security and expand alternative sources of energy like hydro and renewable."
Agrees economist and former Union minister Y K Alagh, "India is a relatively inefficient user of diesel energy." He adds that putting in place global best practices is essential. Examples of these abound. Many countries, for instance, have equal prices for petrol and diesel and have set fuel-economy standards for vehicles to reduce diesel consumption in the transportation sector. They are also promoting rail-based freight as opposed to road-based freight and making efforts to clean up their diesel to reduce public health risk.
Clearly, diesel dependence can be curtailed. Deregulation is one step but the journey to finish off the fuel may be a long one.
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