Vice President calls for relook on energy subsidies

New Delhi, Oct 3 (UNI) Vice President Hamid Ansari today called for having a relook on the energy subsidy policies, underlining that so far the benefit of such subsidies had not reached to the poor to the desired extent.

Mr Ansari said that an IMF working paper on fuel subsidies in five emerging economies had noted that the richest 20 per cent of households received on average 42 per cent of total fuel subsidies, whereas the bottom 20 per cent received less than 10 per cent of subsidies.

Thus universal and undifferentiated subsidies for petrol, diesel and LPG imply a substantial leakage of benefits to higher income groups, he said.

The Vice President was speaking after inaugurating the 'India Energy Conference: Oil, Gas and Alternatives: Building Competitive Markets' organised by The Energy and Resources Institute (TERI) and Petrofed here.

He said the problem of energy shortage could be met to a large extent by managing the demand side.

And a focus on demand management should also lead to competitive energy markets where government subsidies to the vulnerable were clearly targeted, and resource allocation and pricing decisions were market determined and subject to effective regulation.

As the Parikh Committee noted, he said, crucial social objectives of the State should ideally be met through direct transfers.

It has recently been estimated by Morgan Stanley that half of the world's population enjoys fuel subsidies. In effect, this means that a quarter of the world's petrol is sold at less than the market price.

''Fuel subsidies, as you well know, are politically sensitive and have adverse consequences for government finances and the efficiency of energy use. All stakeholders, therefore need to enquire if fuel subsidies are the most efficient way to protect the poor and vulnerable households,''Mr Ansari said.

The ideal, however, is not always possible. Fashioning targeted fuel subsidies, or effecting direct transfers to poor households in a non-fuel subsidy regime, calls for an effective social protection system that could safeguard the real incomes of the poor. This is as yet lacking, he said.

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