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    And Reselling It Back To Citizens at Lower Prices

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    nakul_sehgal_2
    The document discusses the topic of destroying subsidies on fossil fuels in India. It makes four main points: 1) Fuel subsidies place a heavy burden on India's fiscal policy and the subsidy burden will increase as consumption rises and the currency depreciates further. This large subsidy is driving India's growing current account deficit. 2) Fuel subsidies discourage investment in cleaner forms of energy and create economic inefficiencies by burdening government budgets and creating barriers to private sector participation. 3) Much of the subsidies do not reach their intended beneficiaries and tend to benefit wealthier households instead of the poor. They also encourage wasteful consumption since people get used to subsidized prices. 4) Ending

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    And Reselling It Back To Citizens at Lower Prices

    Uploaded by

    nakul_sehgal_2
    40 views3 pages
    The document discusses the topic of destroying subsidies on fossil fuels in India. It makes four main points: 1) Fuel subsidies place a heavy burden on India's fiscal policy and the subsidy burden will increase as consumption rises and the currency depreciates further. This large subsidy is driving India's growing current account deficit. 2) Fuel subsidies discourage investment in cleaner forms of energy and create economic inefficiencies by burdening government budgets and creating barriers to private sector participation. 3) Much of the subsidies do not reach their intended beneficiaries and tend to benefit wealthier households instead of the poor. They also encourage wasteful consumption since people get used to subsidized prices. 4) Ending

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    The document discusses the topic of destroying subsidies on fossil fuels in India. It makes four main points: 1) Fuel subsidies place a heavy burden on India's fiscal policy and the subsidy burden will increase as consumption rises and the currency depreciates further. This large subsidy is driving India's growing current account deficit. 2) Fuel subsidies discourage investment in cleaner forms of energy and create economic inefficiencies by burdening government budgets and creating barriers to private sector participation. 3) Much of the subsidies do not reach their intended beneficiaries and tend to benefit wealthier households instead of the poor. They also encourage wasteful consumption since people get used to subsidized prices. 4) Ending

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    40 views3 pages

    And Reselling It Back To Citizens at Lower Prices

    Uploaded by

    nakul_sehgal_2
    The document discusses the topic of destroying subsidies on fossil fuels in India. It makes four main points: 1) Fuel subsidies place a heavy burden on India's fiscal policy and the subsidy burden will increase as consumption rises and the currency depreciates further. This large subsidy is driving India's growing current account deficit. 2) Fuel subsidies discourage investment in cleaner forms of energy and create economic inefficiencies by burdening government budgets and creating barriers to private sector participation. 3) Much of the subsidies do not reach their intended beneficiaries and tend to benefit wealthier households instead of the poor. They also encourage wasteful consumption since people get used to subsidized prices. 4) Ending

    Copyright:

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    Good morning one and all present.

    The topic before the house today is TH being the house of India believes that by destroying the subsidies on fossil fuels, we promote creation of a more sound fiscal policy and promotion of other sustainable forms of energy. Being the proposition, its my prerogative to define the key term in this motion Here, Subsidies are essentially the government buying energy at market prices and reselling it back to citizens at lower prices. Subsidies are at their best when they are well-targeted, transparent and suitably designed for implementation. The subsidies in today's context shelter inefficiencies, distortion of markets and their opaque, undiscerned and uncontrolled growth can have a deleterious impact on the country's finances.

    My speech today focuses primarily on four constructives. I will highlight the Current economic scenario of India and its inefficiencies, how fuel subsidies have often failed to reach the intended beneficiaries. I will elaborate on how cutting fuel subsidies will incentivize development of other forms of energy and how we need to address and prioritize other key issues in the country. 1. The fuel subsidy burden for fiscal is higher than ever arising from a combination of high crude oil prices, depreciating local currency, and a lack of government reforms with regard to its grip on regulated fuel prices that prevents downstream companies from passing on higher prices to consumers. In the absence of reform, the subsidy burden will increase even further as the consumption volumes rise and the local currency depreciates further. Indias growing oil import bill is seen as the main driver behind the large current account deficit,India needs to raise the price of heavily subsidized diesel to rein in its fiscal deficit and counter the threat of becoming the first of the big emerging economies to be downgraded to junk. Fuel subsidies are generally only possible when a country has windfall revenue in either resources, such as oil in Nigeria, or in trade surpluses, such as Chinas. Both of which India clearly lacks. 2. Economic inefficiencies Discourages Investment Inefficient subsidies on petroleum products and electricity burden fiscal accounts of the governments, incentivize diversion and misuse, and create barriers against private players from entering the market. Subsidies on fossil fuels discourage investment in cleaner forms of energy. Ending excessive and wasteful support for fossil fuels would reduce greenhouse gas

    emissions that lead to global warming. The money saved from fossil fuel subsidies could be used to promote clean energy and energy efficiency alternatives, which would be in line with public opinion. Undistorted pricing of fuels, along with an efficient delivery mechanism of subsidy, will meet the government objective and discourage any perverse incentives created for overuse of fuel, besides encouraging a shift towards cleaner sources of energy.

    3. Unintended usage of subsidized fuel The government has been subsidizing fuels to protect consumers from international price volatility and to make energy affordable in the economy. However, fuel subsidies, often fail to reach the intended beneficiaries. Moreover, there are questions regarding how far these subsidies are benefitting the poor. A larger share of LPG subsidy is consumed by well-off households. Subsidies tend to self-perpetuate; acquire political hues and become linked to populism. They encourage wasteful consumption of resources because people get used to a certain level of usage minimizing the need to develop a more energyefficient fuel. Indian policy makers tend to consider diesel a poor mans fuel because it is used by trucks and buses and by millions of farmers who pump water from deep wells to irrigate their fields. Manufacturers, offices and householders use diesel to fuel the generators that provide back-up electricity during frequent power cuts. But the widening gap between petrol and diesel prices has also prompted a surge in demand for diesel-fuelled cars, including sports utility vehicles, for the middle class, which has helped increase rising demand for diesel. Further since the distribution channels of subsidies are caught in bureaucracy and red-tape; corruption is commonplace.

    4. One of the most obvious benefits of ending fuel subsidies is increasing the availability of public money. There is a high need of prioritization and in Indian economy, resources are limited and have alternate uses. The need of the hour is to develop basic facilities like healthcare, educational facilities and food for the citizens. This will help build longterm human capital that will allow us to remove poverty and sustain the lowerincome segments of the society.

    In the end, lets evaluate subsidies using these 3 questions Do they serve Public or private interest? Clearly private! Are they Achieving the desired objectives? An emphatic NO And they have ve consequences like environmental degradation and corruption. Is

    this the way forward? Certainly not! Thus we need to destroy these subsidies to create a responsible fiscal policy that paves the way for a green and resurgent economy.

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