Crude Oil: Fuel a Long-Term Oil Strategy Now

The reduction in the Indian government’s excise duty on fuels and the increase in subsidies for cooking gas will help counter the rise in inflation. The factors driving inflation – supply chain disruptions caused by war in Ukraine and pandemic shutdowns in China, as well as extreme weather events – remain unresolved. However, the Indian government’s decision offers short-term relief while impacting government spending. A longer term strategy is needed to reduce India’s dependence on oil.

States should follow the Center’s lead and reduce value added tax (VAT). Both the prime minister and the finance minister called on states, especially those that have yet to cut taxes, to step up. The reduction in excise duty has a revenue implication of Rs 1 lakh crore per annum. Increased subsidies for the 9 million beneficiaries of Pradhan Mantri Ujjwala Yojana will provide relief to the poorest. Longer term measures to reduce dependence on oil should be considered. The transport sector, which consumes more than 50% of crude oil, is the starting point.

70% of diesel and 99.6% of gasoline are used in transport. Aggregating energy demand, introducing efficiencies and promoting alternatives must be the plan. Improving integrated, accessible, affordable and reliable mass public transport is at the heart of this transition. Along with exploring and reviving mass transit options, such as trams in urban areas, building electric vehicle (EV) infrastructure, and increasing the share of freight carried by trains, d especially as railways set to decarbonise by 2030. Stricter fuel consumption standards are needed to push alternatives to decarbonise transport.

The long-term plan will not only reduce dependence on oil, especially imports, but will reduce emissions and create new economic opportunities.


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