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Thu, 20 June 2013 11:31:49
Is Sri Lanka subsidizing cancer with diesel?
18 Jun, 2012 05:54:08
By Rohan Samarajiva
June 18, 2012 (LBO) - Health is not a topic that is routinely covered in this column. I am not writing about health per se, but about subsidies that harm health.
Subsidies should be used sparingly. When they are used, there must be a strong public-policy rationale. All subsidies create incentives. More of the subsidized activity happens.

Therefore, the subsidy must be for a socially beneficial purpose. If evidence emerges that the behavior encouraged by the subsidy is harmful, the subsidy should forthwith be withdrawn.

In some cases, the activity could be taxed to discourage it further. This is why governments tax cigarettes.

Last week the World Health Organization issued an important finding. It concluded that diesel engine exhaust is carcinogenic to humans.

The news release (http://press.iarc.fr/pr213_E.pdf) included the following expert opinions:

Dr Christopher Portier, Chairman of the International Agency for Research on Cancer (IARC) working Group, stated that “The scientific evidence was compelling and the Working Group’s conclusion was unanimous: diesel engine exhaust causes lung cancer in humans.”...

Dr Kurt Straif, Head of the IARC Monographs Program, indicated that “The main studies that led to this conclusion were in highly exposed workers. However, we have learned from other carcinogens, such as radon, that initial studies showing a risk in heavily exposed occupational groups were followed by positive findings for the general population. Therefore actions to reduce exposures should encompass workers and the general population.”

Dr Christopher Wild, Director, IARC, said that “while IARC’s remit is to establish the evidence-base for regulatory decisions at national and international level, today’s conclusion sends a strong signal that public health action is warranted. This emphasis is needed globally, including among the more vulnerable populations in developing countries where new technology and protective measures may otherwise take many years to be adopted.”

Dr Wild’s views were amplified by the New York Times: The W.H.O. decision, the first to elevate diesel to the “known carcinogen” level, may eventually affect some American workers who are heavily exposed to exhaust. It is particularly relevant to poor countries, where trucks, generators, and farm and factory machinery routinely belch clouds of sooty smoke and fill the air with sulfurous particulates.

In addition, we in Sri Lanka now have an additional source of carcinogenic diesel fumes, the slow-moving diesel three-wheeler.

It is well known that the government of Sri Lanka subsidizes diesel to the tune of millions of rupees. It is because of these subsidies that the number of diesel-powered vehicles has increased on our roads, including the diesel-powered SUVs favored by the political class.

The latest addition is the diesel three-wheeler that not only generates noxious fumes but increases the exposure of the driver and passengers by positioning them directly in line with exhaust pipes. The protections afforded to passengers in cars with windows that can be closed are unavailable to persons in three-wheelers.

Now that the medical evidence is in, will the government take action to

(a) gradually phase out the diesel subsidy;

(b) prohibit the importation of diesel-powered three wheelers;

and

(c) introduce new emission standards for the diesel-powered vehicles already in the country?

Rohan Samarajiva heads LirneAsia, a regional think tank. He was also a former telecoms regulator in Sri Lanka. To read previous columns go to LBOs main navigation panel and click on the 'Choices' category.

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READER COMMENT(S)
11. Rohan Samarajiva Jun 21
Specific proposal is to prohibit further importation of diesel powered three wheelers with immediate effect. There is a perfectly good substitute: the four-stroke petrol powered three wheeler. Note that I did not propose prohibiting anything else at this point: not buses, not trucks, not even the diesel SUVs favored by the political class.

If banning diesel threes makes no difference, banning two-stroke three wheelers also made no difference. Banning anything makes no difference. This is a nihilistic argument. Why not go back and argue that two-stroke three wheelers should also be permitted?

The second proposal is that the diesel subsidies be GRADUALLY phased out. Subsidies of carcinogens is wrong. They distort purchasing decisions. By doing this we will remove the artificial inflation of demand for diesel vehicles.

The third proposal is that new emission standards for the existing stock of diesel vehicles be developed using specialist knowledge. Surely, no debate on this?

10. fb Jun 21
Nishantha
The price of fuel in Singapore quoted is the refined price that is exported around the world including to Sri Lanka. FOB Singapore if you will.

In many countries where political deceptions are less diesel has a higher pump price. For example UK. At least road diesel does. That is because fuel is taxed to maintain roads.

But for these things to happen the population has to see through the fraud. It is not easy.

Your own comments point to a glimmer of truth. If 'everyone' receives a subsidy, then who pays?

Everyone pays, obviously. In redistribution has a cost, including actual bureaucratic costs (the state machinery maintained to re-distribute), the wrong price signals (excess consumption of the under-priced vs the overpriced), even lost taxes in addition to the basic injustice. Also it prevents increases in productivity i.e more efficient use of a fuel.

The second part of the who receives is fairly simple.

The biggest users do. The richest people who travel around in SUV get large volume subsidies running into tens of thousands of rupees a month. A motorcyle users pays massive taxes when he goes to work and picks up his kid for the SUV guy to whizz around in aircon comfort.

That is social justice.

Hotels get below cost energy. So do export industries sometimes. So foreign customers whose income levels are higher than us get subsidies, paid for by motorcyle owners or high import duties, VAT, Bandual Gunawardene taxes etc on basic foods. That is also social justice, our style.

Income re-distribution (developed in Western countries true) is a scam. Any income support should be given to the poorest people as a cash grant to spend as they wish.

Energy in general is consumed more by higher income earners. That is why countries with high incomes consume more energy per capita.

And what about the burden of the 130 rupee exchange rate on the 'masses'? Without credit taken for energy subsidies, this balance of payments crisis would not have happened. Of course this is also furnace oil not just diesel.

The masses would pay less on their salaries for all goods. In fact they would also pay less for energy. The calculation for petrol at 83 rupees is based on a rupee at 133 and refined petrol at 101.5 US dollars a barrel. At an exchange rate of 110 rupees a dollar the cost of petrol would be 69 rupees. Diesel would be 76 rupees not 91 rupees.

At these prices there is no 'subsidiy' on diesel anymore perhaps. You should not try to mis-price fuels. If all fuels were priced the same people will use more petrol trucks etc. The large prime movers that you see on our roads are all diesel. But they also come with petrol engines in other countries. We don't import them here because diesel is mis-priced.

Remember in the old days soon after independence there Austin petrol lorries? Those were happier less interventionist days when rule of law and laws of nature governed a much happier and a more peaceful people.

Overpricing food with high protectionist taxes and subsidizing imported energy with credit and busting the exchange is not fair income re-distribution.

Having said all that it must recognized that the Treasury this time corrected the anomaly by raising diesel and furnace oil by a larger quantum that petrol.

9. Nishantha Jun 20
Now we are at interesting point of the article and subsequent discussion. My understanding of your article is as follows, Government should save general public from exposure to carcinogenic fumes from diesel engine exhaust. You proposal is to ban diesel three wheelers and remove subsidizing of diesel to achieve it.

My point of explanation is,
1. Banning of diesel three wheelers has insignificant impact on the total expected result. I am not saying that diesel three wheelers should not be banned also. It is like removing one soldier form an army. My feeling is learned people in our society should find/suggest more effective solution(s) to the requirement.

2. Suggesting to remove subsidized diesel is unbearable to general mass at this point of time. General mass is suffering heavily due to high cost of living and other economic conditions at present. Diesel at further high price will increase prices of everything. This may lead to social unrest and we have limited control once evolve. It may reverse even the only gain we achieved three year before.

On the comments made by fb,
It states “it is unjust to make petrol users pay for benefits enjoyed by diesel users”

Who are the petrol users and who are the diesel users?

There are petrol vehicle users and diesel vehicle users. Petrol users are sub set of diesel users. Almost no person in our society can claim that I am not utilizing any services or energy generated/associated with diesel. So all are diesel users.

When someone pay high price for petrol at fuel station he may feel that I am paying high price to compensate subsidized diesel. But don’t forget you get many other products at lower prices due to subsidized diesel.

On the prices of diesel and petrol at Singapore, what was the price of petrol and diesel at fuel stations in Singapore on 19th of June? Which one is higher? Why Singapore is selling diesel at lower price than petrol? Is it because Singapore government is thinking same like public in Sri Lanka as you suggested? Sri lankans can have honoured feeling.

On “energy is subsidized to some user”, every Sri Lankan is getting subsidized energy in one way or the other. Who can say I am not receiving any benefit from subsidized energy (electricity, diesel etc)

I am not going to comment on depreciation of rupee, balance of payment crisis and its relatedness to subsidized energy now. Generally, politicians would like to say all economic woes are due to subsidized energy and cover their inabilities.

Income redistribution is not for getting thrills to politicians. Learn about French revolution. Political stability of a country is a basic requirement for any business to thrive and people to enjoy their life.

8. Rohan Samarajiva Jun 20
I am happy that the authority of the IARC/WHO has been recognized. But there is no point in referring to Category 2A or 2B items at the same time. The degree of risk is fundamentally different.

Diesel fumes cause lung cancer just like cigarettes do. That is what Category 1 means. Petrol does not.

I am not suggesting that we prohibit trucks or buses. I am suggesting the import of diesel three-wheelers be prohibited.

There is a perfectly good/better substitute: the four stroke petrol three wheeler. We stopped importing 2 stroke petrol vehicles. Now we should stop importing diesel three wheelers. Why this retrograde step was taken is to me a mystery because even before the WHO ruling we knew diesel was dangerous.

Then we should carefully develop new standards for all diesel vehicles still on the road. And devise ways to reduce the harm they cause.

The removal of the subsidy is now being discussed in France. fb has dealt with this matter adequately, so I will not.

7. fb Jun 20
Nishantha,
Sri Lanka's refinery cannot produce enough light distillates (diesel, petrol etc) and makes more furnace oil due to lack of cracking technology and under-investment also due to past subsidies and losses. But domestic refining is a different issue altogether, since it is a problem created by ourselves.

What matters is that Diesel is a more expensive fuel to even import than petrol, and the bulk of our diesel is now imported refined.

Diesel subsidies and excessive taxation of petrol should be ended simply because it is unjust to make petrol users pay for benefits enjoyed by diesel users, even if the cancer issue was not there.

Market pricing diesel above petrol will discourage the excessive use of diesel and more people will shift to petrol which is the cheapest fuel - cheaper than kerosene.

For example on June 19, the Singapore price of petrol was only 101.5 dollars (About 83 rupees a litre - after taxing heavily petrol is sold at 149 here). But diesel was 111.2 dollars (about Rs 91) and kerosene 112.1 (about 92 rupees).

Usually what happens here is energy is subsidized to some users, losses are financed by bank credit. The rupee then falls, and then the prices are raised The burden then falls on petrol users. Then diesel which is more expensive to import is given further incentives - cancer and all. That is public policy for you Sri Lanka style.

The diesel 'subsidy' is paid for by increased taxes on other goods including petrol and food and a steep fall in the rupee as well as an increase in the national debt.

Sure, those in power pay income redistribution games and probably get some thrills by cheating the public but at what cost? And for what benefit?

6. Nishantha Jun 20
@Rohan, I accept the impartiality of the study finding on the basis of WHO endorsement of the result. According to the IARC paper that referred, it states ‘There was sufficient evidence in humans for carcinogenicity of diesel exhausts’ it also states Gasoline fume (petrol exhaust) was possibly carcinogenic to humans’.

So what advantage Sri Lankan society will get by removing (suggesting to remove) the subsidized diesel? Is it worth the price we pay at this point of time?

Regarding your argument on cigarette and asbestos; do you consider cigarette or asbestos is essential same like diesel to average person in our society. I also support banning of asbestos and controlling of cigarette in Sri Lanka since cigarette is not an essential item and for asbestos, we have economical substitutes. Do we have economical substitute for diesel?

For your information, Sri Lanka buy middle distillate rich crude (for producing more diesel) at around US $ 90 per barrel. For us to buy light crudes (for more petrol producing), we have to spend around US & 104 per barrel.

Does our society have capacity to bear that cost? “Yes” may be after we develop our oil fields but not at this moment.

Regarding the three wheel issue, diesel three wheel engine capacity is approximately 400 CC, a container transporting truck’s diesel engine capacity is approx. 12,000 CC (Benz Actrose / Nissan Diesel/Scania). (Almost all of the heavy vehicles are having diesel driven engines)

How many three wheel exhaust is equivalent to one container transporting truck exhaust. You can judge the categories of vehicles polluting Colombo. Moreover, we have Kelanitissa, AES Kelanitissa and many other power plants inside Colombo city that exhaust more diesel fumes to city.

Can we reduce the usage of them by removing the subsidizing on diesel?

Engine capacity (displacement) and engine rpm are the more important variables related to engine exhaust rather than vehicle speed you referred in diesel three wheelers. Removal of subsidizing on diesel will have adverse impact on poorest of poor in our society and more may die due to starvation than cancers due to exhausts fumes of diesel.

Our prime concern now with the WHO finding is how to preserve health of our people from vehicle exhausts (not only diesel) so subsidized diesel is insignificant in the total context.

What I believe is, we have to learn from Scandinavian countries, please write an article about it and enlighten our society on how those societies reduced exhaust emission. One day, that will bear more fruit than suggesting to remove subsidized diesel.

5. Rohan Samarajiva Jun 19
@Nishantha, please check the link (provided above) and read the actual report.
I agree with you that policy responses are not required for one finding. But this is the result of decades of investigation and assessment of multiple research findings.

It was well known for years that diesel fumes are bad for people. For example see: http://www.tveap.org/?q=1104qca_pn.php

But now we have authoritative evidence. There can be no stronger indictment than what was been issued by the WHO.

People who do not take this determination seriously should take up smoking and start rolling around in asbestos fibers. These are the other Category 1 carcinogens according to the WHO.

BTW, you can have your three-wheelers, just not the slow-moving diesel threes. The great majority of three wheelers made by Bajaj, TVS etc are petrol-powered.

4. nishantha Jun 19
There are proofs that water contain unstable H3O and it is carcinogenic, shall we discourage population to drink water. Similarly carrot also reported as contain carcinogenic substance. What did we do? Similar campaign was there to remove coconut oil from markets saying it elevate the cholesterol but the arguments are debatable evidence are there for both for and against.

When Muralitheran was famously reported for chucking, it is part of greater plans to remove future threats to some powerful parties. The case behind the coconut oil is same.

When you run your vehicle, whether it is diesel or petrol, if it is complete combustion, the exhaust is carbon dioxide and water. If it is not complete combustion it is not a problem of fuel, it is a problem of engine. Engine to be fixed first. The constituent of petrol and diesel is same other than additives.

Sulfur content is governed by country regulation and present in both diesel and petrol. May be western car manufacturers are fearful of three wheelers getting popularity in their part of the world in future due to fuel crisis and preparing their ground work for eliminating future threats.

No point of making a panic situation due to just one research finding, if necessary as a precautionary measure three wheel passenger areas should be make as cabins with doors. Questioning the diesel subsidiary is very primitive thinking considering the situation in Sri Lanka. Even our dreams should match with our surrounding

3. Lazarus Jun 18
Cigarettes kill a lot more Sri Lankans than Dengue
2. Bimal Jun 18
Smoking being an addictive habbit does not go off just because you increase the price. It actually causes more harm as now there will be social issues where people reduce spending on basic necessities to be able to afford cigarettes.

One must look at the bigger picture and introduce other deterrents such as control selling mechanisms and prohibit smoking in crowded places (even bars and resturants). Even introduce subsidies for cancer/lung tests.

1. Observer Jun 18
'In some cases, the activity could be taxed to discourage it further. This is why governments tax cigarettes.' -
Is enough being done to discourage cigarette consumption though ? Judging by CTC's record profits, and the significant contribution to the state (approx 75-80% of the price of a cigarette is tax)
, high taxes have not discouraged smoking. Not surprising, given highly inelastic demand for the addictive product.