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Fuel inefficient India heading towards energy crisis

, by Down to earth

Energy insecurity is India’s latest tryst with her post-liberalised destiny. It began in July 2006. Crude oil prices rose to all time peak, at US $79 a barrel. In India, retail prices of petrol and diesel rose, respectively, 59.6 per cent and 78.8 per cent from 2002 levels. A compelled government, and the public oil sector companies, absorbed a staggering 87.5 per cent of the costs of the hike in oil prices.

After the price hike last year, many Delhi-ites reportedly switched to buses and the metro-the Delhi Metro Rail Corporation flaunted a 12 per cent increase in trips. As Jaibir Kakar, a retail fuel pump owner in Hemkunt Colony put it, “Our sales do show a difference when the prices rise. The last time prices escalated, our average sales dipped by about 10 per cent. People find ways of saving fuel, whenever the monthly budget gets hit-they use less of it or buy lower-grade cheaper fuel to save money.”

It is clear that fuel price, in particular the price of transportation, costs each household. Indians are spending more on conveyance than ever before, especially the more affluent in cities, who rely heavily on personal vehicles.

According to data collected by the Central Statistical Organisation over the past 10 years, transport accounts for a greater proportion of the household budget in India.In 1993-94, households were spending roughly 56 per cent of their monthly budget on food. By 2003-04, this was down to 45 per cent. During this same period, the single largest increase in expenditure was in transport. In early 1990, the average household spent 11.3 per cent of its monthly budget on transport. By 2003-04, it had gone up to 17.1 per cent. After food, it accounted for the largest part of household budgets. The average household spent more on purchase of personal transport and a lot much more on their running costs-in other words, buying fuel to run vehicles.

This same data shows that 8.9 per cent of an average Delhi citizen’s monthly expenditure is on conveyance-much higher than the all-India average of 6.52 per cent. In terms of non-food expenditure, this share would increase to 15.22 per cent, much higher than the 11.34 per cent of the non-food expenditure in the rest of the country. Lower income groups in India spend 4-8 per cent of their non-food expenditure on commuting. The urban poor in Delhi, though, shell out about 12-13 per cent. Expenditure on conveyance for the more affluent urban class of Delhi is 15-16 per cent of their non-food expenditure-this is 2-4 per cent greater than the all-India average. Other Indian cities are going the same way.

But car sales in the country do not reflect this pinch on the household budget. According to the Society of Automobile Manufacturers (siam), carmakers have never had it so good. Even as the price of fuel shot up, the sale of vehicles boomed, the society points out. Car sales crossed the one million mark in just 11 months of 2006-a growth of 19 per cent over the last year. Sports utility vehicles-fuel guzzling monsters-grew at 7.5 per cent.

During the 1990s motor vehicle ownership escalated at roughly 10 per cent each year; about 15 metropolitan cities registered over 15 per cent growth. Delhi, averaging more than 200,000 cars a year, broke its own record-more than 340,000 cars-in 2006. One in ten families in Bangalore now own a car, and almost every family owns a two-wheeler. Just two decades ago, one of every 16 families owned a car and one in four, a two-wheeler. Cheaper loans, rising income, and changing consumer preferences have toppled the global balance: the growth rate for vehicles in the West has levelled off at 5 per cent each year; in Asia it is 15-30 per cent per year.

But is the Indian economy really capable of absorbing this cost? What are its implications on the country’s energy costs?

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