Delhi’s air is being polluted by three perverse subsidies

Delhi’s air pollution is terrible. The National Green Tribunal (NGT) has banned diesel vehicles more than 10 years old, having already banned petrol vehicles over 15 years old. But IIT Professor Dinesh Mohan has revealed that old vehicles constitute a tiny, almost irrelevant fraction of Delhi traffic.

Delhi has fewer cars per thousand persons than Singapore, London or Paris, but much dirtier air. Mohan says much better data and research are needed to identify all the causes. The courts have over the years passed several orders — shutting polluting industries, instituting vehicle pollution checks, converting public transport to CNG, and so on. Yet, Delhi’s air is worse than ever. We have a poor understanding of the underlying causes.

Mohan cites one research study showing that transport accounts for only 17% of particulate pollution. Yet the tribunal seems to think this is the main cause. Mohan suggests much broader solutions including a massive switch to public transport and mixed residential-commercial zoning to cut commuting.

These issues are important, but only part of the story. In this column, let me highlight three massive subsidies that encourage dirty air, yet are widely ignored in debates. The big subsidy for diesel, a polluting fuel, has now ended. The sharp fall in global oil prices has enabled the government to decontrol diesel. But kerosene remains highly subsidized. It sells for barely Rs 15/litre, a third to a quarter the price of diesel in different states. Unsurprisingly, studies suggest that up to 40% of kerosene is used for adulterating diesel. And adulterated diesel is the most polluting fuel of all.

Politicians keep kerosene ultra-cheap, supposedly to benefit poor villagers using kerosene lamps. But the main beneficiaries are blackmarketers and adulterators. Some experts suggest raising the quality of fuels produced by refineries to cut air pollution. But even ultra-pure diesel and petrol will become highly polluting if mixed with kerosene. The profits from adulteration are enormous, and the police-judicial system has proved incapable of checking it.

The simplest way forward is to give villagers entitled to subsidised kerosene one free solar lamp each, warrantied for five years. After that, the kerosene subsidy should be abolished, and the price of kerosene and diesel should be equalized. By ending the incentive to adulterate, this will allow kerosene to be sold at filling stations.

Diesel adulterated with kerosene also spoils diesel engines, shortening their lives. The spoiled engines further increase air pollution, a double whammy. Thus kerosene adulteration has severe environmental as well financial consequences for trucks, railways and diesel gensets. Yet, no activist will approach the courts to demand an end to the kerosene subsidy and equalization of diesel and kerosene prices. That is considered politically incorrect and anti-poor. Sorry, but the pollution unwittingly ensuing from cheap kerosene is terrible for the lungs of poor people with limited access to medical help. The worst hit are pavement dwellers, who bear the brunt of vehicular smoke.

The second hidden polluter is subsidized urban electricity. Urban power supply is so erratic that diesel gensets are being increasingly used as a back up. These are highly polluting, yet serve an important and rising need. The solution is to ensure 24/7 electricity, making gensets superfluous. Alas, politicians insist on high subsidies that have crippled most state electricity systems, with annual losses of over Rs 60,000 crore and cumulative losses of Rs 300,000 crore. There is an urgent need to check subsidies, along with power theft and transmission losses.

Yet, most politicians give top priority to lower prices, regardless of the financial consequences. Today, even when surplus power is available, some states cannot buy it for want of cash. The resulting power shortage increases genset use and pollution. No activist castigates subsidized electricity as a polluter, but it is. India needs empowered independent electricity regulators setting tariffs at levels that ensure solvency and facilitate 24/7 electric supply, ending genset use. Limited subsidies for the poor are feasible.

A third major cause of pollution is free or highly subsidized parking. The NGT wants to end parking on Delhi roads to lower congestion. But even official parking lots are highly subsidized, and some charge just Rs 10 per day. This should be closer to Rs 200 per day, or Rs 25 per hour, to reflect the true value of social space. A parked car occupies up to 150 sq ft, as much as a small shop. When shops pay high rents, why not cars too? The higher parking charges can be used to improve public transport.

In sum, the tribunal should avoid solutions like an army of inspectors checking the age of every vehicle entering Delhi. Instead, it should curb perverse subsidies that encourage pollution.

4 thoughts on “Delhi’s air is being polluted by three perverse subsidies

  • 2015.May.16 at 10:51

    Judges and activists and bureaucrats are unlikely to pass or support any law that causes them inconvenience

  • 2015.Apr.26 at 12:06

    You have advocated an increase in electricity tariffs. Instead of that, why shouldn’t the authorities be pressured to address the inordinately high level of inefficiency in electricity generation due to which the cost of electricity generation is very high? Raising the tariffs is tantamount to rewarding those same inefficiencies.

  • 2015.Apr.20 at 15:07

    very enlightening article, an interesting point of view.

  • 2015.Apr.19 at 18:34

    what are appropriate rate for selling kerosene to people with no electricity ?


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