Higher fuel prices may curb carbon emission

Notwithstanding the central government’s recent steps to expand its carbon tax net, there is still room for “price reforms” for petroleum products and enhancement of coal cess that may put India on a firm footing at the global climate change negotiations before the Paris summit in December.

India is the world’s third largest emitter of the global warming-causing green house gases and is under pressure from the rich nations to reduce its carbon footprint.

As excise duties on petrol and diesel act as an implicit carbon tax by putting an effective price on emission, the government decision on cutting down oil subsidies and increasing tax on petrol and diesel mark the Centre’s strategy to move from a “carbon subsidy” to “carbon taxation” regime, which is a welcome step in the climate change negotiations.

While petro products witnessed considerable price increase between 2012 and 2015, there is still scope for further reforms of petroleum pricing policies, says the Economic Survey, 2015 tabled in the Parliament on February 27.

Similarly, on coal that witnessed a 100 per cent jump on cess in the NDA regime, there is room for further increase in cess through a price rationalisation mechanism.

The survey found that even with the maximum possible increase in coal cess, the coal-based power producers could still break-even.

The government, however, would have to keep in the mind the implication for poor man’s access to energy while imposing additional cess on coal.

Deregulation of petrol and diesel prices and doubling of coal cess were important steps for India to showcase to the world its intention to take action on the climate change front.
But there is still a long way to go if large gains are to be reaped from the reforms in coal and petroleum sectors.

The move towards substantial carbon taxation combined with the ambitious solar power programme suggests, India can make substantial contribution to the UN climate summit in Paris, which will set the policy agenda on environment for the globe for the next 15 years.