Differential taxation of diesel is commonly considered to be a panacea for all ills ranging from pollution to managing the fiscal costs associated with galloping use of the fuel. All it will do is to revive the kind of tax anomalies seen during the years of socialist-style licences and controls.
One proposal—popular among ministers and now with economists—is to levy extra taxes on diesel-guzzling SUVs. These range from a higher road tax to costlier diesel for users of such vehicles.
There are no easy solutions. The basic problem is the huge price gap between diesel and petrol, and the government’s inability to raise the price of diesel sufficiently. As a result, the transport sector is now “dieselized”. The farmers are now just an excuse. The fact is the government knows the consumption pattern of fuels and is mortally scared of offending the urban electorate that has switched to diesel in a big way.
It needs to find better excuses.