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Dual fuel and tax-led gains

Rising prices of petrol and diesel are drawing the predicted response from automobile manufacturers: vehicles that run on cheaper, alternative fuels. Maruti's Wagon R can now run on either liquefied petroleum gas or petrol, and Tata Motors' Indica can use compressed natural gas or petrol, giving their drivers the chance to reduce fuel costs by up to 30 per cent, and do their bit for the environment as well. The environmental argument is persuasive and simple. Engines that use gas emit less carbon monoxide than those that burn petrol; they also spew less nitrous oxide than those using diesel. This environment-friendly nature was seen as enough reason for London to waive the congestion surcharge for LPG-fuelled cars that enter its central district. Compressed natural gas, which the Supreme Court mandated for use in New Delhi buses, has helped clean up the capital's air. But that is not why manufacturers and drivers elsewhere in India would like to give gas a try. The LPG vended for vehicles does not enjoy the subsidy extended to the cooking fuel. There is no evidence to show that engines run more efficiently on gas than on petrol, in the way diesel engines have proven to be. On the contrary, there is enough experience to suggest that the engine could be sluggish. The country's refineries do not produce enough LPG to satisfy the huge household demand, necessitating costly imports. Pumps that vend LPG are still few and far between even in the cities, which could make refilling bothersome for inter-city driving. If manufacturers have introduced the dual fuel model, it is to ease such driver fears: when one runs out of LPG or CNG, there will be a tank of petrol to turn to.

Yet it will be the distinctly lower cost of driving around on gas that will sway consumers. That advantage flows from the fact that gas bears a lower excise duty and sales tax than petrol does, and therefore is available at a relatively attractive price at the pump. For India as a whole, this shift will not help reduce in any way the demand for petroleum fuel, 70 per cent of which is now refined from imported crude oil. What can do that are the two bio-fuel programmes, which were launched with much fanfare but are left struggling. The first is the 5 per cent doping of petrol with ethanol, an action mandated in 10 States but not complied with in a sustained manner. This is because the oil marketing companies have been unable to convince sugar companies to furnish enough ethanol, price being the subject of contention. The more ambitious plan for bio-diesel depends crucially on the programme to grow energy-delivering plantations such as those of jatropha on a massive scale. Yet aside from a few minor initiatives, and the regular exhortations from President Abdul Kalam, there is little evidence of success on the ground. Till the Central Government acts firmly on the two issues, the nation must be content with the gains from the tax-induced switch to gas.

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