More on the Sri Lanka cancer subsidy: Not just fuel

Sat, 25 May 2013 00:42:24

09 Jul, 2012 05:57:00

By Rohan Samarajiva

July 09, 2012 (LBO) - A few weeks back I wrote that the government is subsidizing a known carcinogen, diesel, pointing specifically to the lumbering, noxious-exhaust-spewing diesel three wheelers. I was then only talking about subsidies on diesel fuel. I’d been thinking it would be nice to support my argument with some data.

Then I saw the big advertising spreads in the Sinhala papers from the various companies selling diesel three-wheelers. The principal claim is that the fuel savings would pay for the vehicle. A nice table provided the comparison for petrol and diesel three-wheelers.

The monthly savings on fuel alone for a diesel three wheeler running 100 km a day, compared to a petrol three, would be LKR 9,255 (for those who may be reading this from abroad, that’s USD 69.41 a month). That’s serious money.

Now that the first job had been done for me, I went on to look at what had happened to the excise taxes on vehicles on 31 March 2012. I thought the government may be continuing the old practice of subsidizing diesel fuel, but hammering diesel vehicles that were not buses and trucks (the stated beneficiaries of the diesel subsidy) at the point of import.

Apparently, not any longer. Not for three-wheelers.

The taxes for petrol and diesel three wheelers have been unified, as of 31 March 2012.

What matters to a buyer deciding between petrol and diesel is not the uptick in lung cancer he may cause by purchasing a diesel three wheeler. What matters is that, as of 31 March 2012, there is no difference in taxes between diesel and petrol. Earlier, he had to pay 61 percent of the value for the diesel three-wheeler in taxes, versus 51 percent for the petrol version. Now the source of a confirmed carcinogen costs the same as the probably cancer-causing petrol-powered vehicle.

So the only differentiating factor is the fuel cost. And as we are informed by authoritative source, it’s LKR 9,255 cheaper to run 100 km in a diesel three.

For those who think we are talking about marginal amounts of cancer causing diesel fumes, the above table should be educative. One out of four vehicles brought into the country in 2011 was a three wheeler. If the excise tax unification and the diesel subsidy continue, one out of four vehicles brought into the country will be a diesel three wheeler, emitting a known carcinogen as confirmed by the WHO.

One out of four could be a low projection. People who cannot afford cars and vans but want private transport may shift to three wheelers. Already there is a shift from two wheelers to three wheelers. In which case, the cancer-emitters (including the protected-from-emission-tests buses and lorries) may easily exceed half the vehicles on the road. That’s a lot of cancer-causing exhaust on the roads.

Few years back, the government banned the importation of three-wheelers with two-stroke petrol engines to save us from asthma. It is time to ban the diesel-powered three wheelers to save us (and the government health service) from an even greater scourge: lung cancer.

No need to mess around with excise duties (no need to apologize, the WHO ruling came after the excise taxes were unified). No need to put signs saying “Diesel Kills” on diesel threes. Just ban the thing outright, quick.Has been done once. Can be done again.

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)

7. Monika Jul 19

1) Diesel should NOT be subsidised
2) Super Diesel should be same price as super petrol.

6. Rohan Samarajiva Jul 18

New and relevant information:
< “Our (diesel) fuel quality is bad compared even to India’s,” he says. “The diesel sulphur level in Sri Lanka is 3,000 parts per million (ppm), while in India it is 350 ppm (almost one tenth of ours), and in Japan, 30 to 50 ppm.”

He adds: “When we burn high sulphur diesel, it emits larger amount of Sulpher Dioxide gas and Particulate Matter known as PM10. The Ceylon Petroleum Corporation (CPC) still has not taken action to go for a cleaner fuel supply programme.”>>

From Nalaka Gunawardene: http://collidecolumn.wordpress.com/2012/07/15/when-worlds-collide-24-kicking-lead-in-petrol-lessons-for-cleaning-up-dirty-diesel/

5. T.S.B.Ratnayake FCMA,CGMA Jul 10

Talking about Diesel vs Petrol let me provide some rod tax foigures in Britain so that this useful discussion is taken further.The road tax is mainly based on the amount of polloutin putout to the envirionment.(More pollution more tax).

a)Mercedes Benz C class 2.1 liter diesel engine.Y.O Manufacture 2011, MPG 60 milles.Road Tax GBP130.
b)Mazda 3, 1.6 liter Diesel engine y.o.Manufacture 2009,MPG 65miles.Road Tax GBP 30.
c)Nissan Micra,1.3 liter petrol engine MPG 47 Milles.Road Tax GBP 130.

With above data Road Taxes clearly favoring diesels even in passenger transport let me now state what I have empiricaly observed about disel three wheelers that can subsistitute for a small lorry,(I have hired these to carry around 13, 50 KG fretiliser bags at a time, many times & has seen many people in agricultural areas do so since the petorl subistitutes will not have a chance with this kind of loades.

Whilst humbly agreeing to the fact that above mentioned engines cannot be compared with a threewheeler diesel engines & I have a very limited knoledge about mechanics or medicine do belive we do have to clearly understand how & why in Europe the diesels are forging ahead of petrol with the state support whilst SL is encouraging the use of petrol as a policy(Lower tax on petrol passenger vehicles).

Clear answers to these questions may shed light beyond threewheelers onto a billion rupee riddle should we use more petrol engins or good diesel engins?Over to experts.

4. fb Jul 10

The point is taken. There is no disputing the usefulness of not having diesel three wheelers on the roads, or taking measures to stop them.

The point of the earlier comment was to show that removing the incentives for people to use diesel - which is created by state interventions which restrict peoples' liberties - will also achieve the same objective. Plus it may also be be useful to take it beyond three wheelers.

In this case the promotion of diesel is achieved by restricting the freedom of petrol users(i.e overtaxing of petrol).

However since restoring the liberties of petrol users is probably a pipe dream, there is probably no option but to engage in further interventions to potentially avoid future cancer deaths.

3. Rohan Samarajiva Jul 10

Surprisingly, fb appears to miss the key point. Diesel fumes are a category 1 carcinogen, just like directly inhaled cigarette smoke. We put "Smoking Kills" signs on cigarette packs so that those who inhale the carcinogen do it with full knowledge.

In the case exhaust from diesel powered vehicles, those who have not purchased the diesel have to inhale it. There is no action they can take to avoid the carcinogen, other than stopping breathing or not going on roads. The minority who use cars have some degree of protection as long as they keep their windows up and AC on.

It is in this context that I ask that further imports of diesel three wheelers (for which there is a perfectly good substitute, the petrol three wheeler)be stopped.

In economic terms the use of diesel three wheelers causes an unavoidable negative externality. I wish it were possible to apply the Coase Theorem so that the liberty of those who wish to use diesel three wheelers can be preserved, but there is no solution.

If my proposal is a limitation of liberty, so were the phasing out of leaded petrol (there is very good science on the beneficial effects of this on Sri Lanka police officers) and the banning of the import of two-stroke engine powered three wheelers.

2. fb Jul 10

This is a classic case of one state intervention (mis-pricing diesel) needing two or three more restrictions on the people to cure its ills. In the process their freedoms are reduced and bureaucrats and rulers are given more opportunity to meddle in their lives, steal their freedoms (well-intentioned in this case may be), set more precedents for bans in the future and cause misery and war.

If diesel was market priced (diesel is more expensive to import than petrol) overall less vehicles would run on diesel. There was a time when practically all the cabs were large vans. Even 'private cars' were vans. Now with a diesel prices being a little higher (still far below petrol) there are more petrol cabs and cars.

Diesel three wheelers are probably manufactured in the first place in Asia because many Asian nations under-price diesel due in their desire to intervene in a failed desire to keep inflation down or because expectations of cheap diesel is a vote buying tactic.

Market priced diesel will also eliminate the need to practice differential taxation on diesel cars now. It may also increase the import of large petrol driven vehicles, from small trucks to prime movers, to vans and SUVs.

All of these vehicles are manufactured to run on petrol in countries where fuels are not mis-priced. In the interest of increasing the freedoms of all people of Sri Lanka it is better to state allow the import of petrol vehicles, including petrol trucks duty free and charge simply VAT.

This is from the 2009 budget of India. Quote from IBNLive "Excise duty on petrol-driven trucks and lorries has also been reduced to eight per cent from 20 per cent. "Petrol-driven trucks provide a useful means of transport within cities and across short distances. These are chargeable to excise duty of 20 per cent. I propose to reduce excise duty on these trucks to eight per cent to equate the duty with similar vehicles run on diesel," Mukherjee said.

What we need is a commission of inquiry including public consultation on this matter.

a) What are the effects of diesel power plants? What are the effects of the CEB's residual oil power plant? What are the effects of furnace oil plants?

b) Are the public prepared to pay higher prices to shut these down?

c) If yes to a) Is there a better case to support LNG for power (covert all existing combined cycles into LNG) instead of diesel on health grounds?

And will the public pay any higher price necessary? These power plants are in the middle of Sri Lanka's most populous city

1. Amila Jul 09

Really appreciate your article. But can you tell us that the portion of Diesel those three whelers use, Vs the heavy machinery we are using, the amount of diesel we consume for producing electricity (That may be more than 1500MW-along with HFO plants), so my point is if NOx is a serious case, we have to think more on all of these.