"So the rich man riding a luxurious diesel powered sports utility vehicle (SUV) has part of its cost paid for by three-wheeler operators.
"This is the stark reality and the sooner people understand it the better."
Almost all Sri Lankan politicians own SUVs imported tax free. Only the richest sections of society can buy expensive diesel vehicles. Petrol is mostly used by motorcycle owners, small car users and three-wheelers.
The editorial came in the wake of plain speaking by Sri Lanka Railways chief Lalithasiri Gunaruwan who said it was an 'economic crime' to freeze prices and depend on Treasury subsidies as the poor who did not use the service ended up paying for them.
This was after transport minister Dallas Alahapperuma told the utility to raise prices, going against the usual practice of ministers who buy votes and popularity by running down the financial health of institutions coming under them.
"Governments, and not only this one, have for too long conned the people on fuel subsidies," The Sunday Island said."It is seldom if ever admitted that a major revenue stream for the exchequer comes from the various taxes charged on fuel.
"When whoever is in a seat of authority talks about the cost of fuel and the sale prices, pointing out that the various types of fuel are being sold below cost, the tax component is conveniently ignored.
"This is the kind of spin that the people are subjected to by their leaders who heap their own plates with gravy at the cost of those they represent."
Though 'subsidies' are promised to all and sundry and tax increases are resisted by politicians of all hues, budget deficits and accommodative monetary policy later result in high and chronic inflation which hurt the poorest sections of society most.
Sri Lanka has suppressed two inflation indices in the recent past as inflation moved to 29.9 percent. Inflation measured by the new 'official' index is now 26.2 percent which is the highest in Asia.
The full editorial of the Sunday Island is reproduced below:
Saying it like it is
The General Manager of Railways, Lalithasiri Gunaruwan, in a burst of candour last week blasted the long-held myth that governments, whoever they are, subsidizes consumers be they kerosene or diesel buyers or bus or train travelers. He rightly pointed out that when so-called subsidies are given to sections of consumers, all the people including those who do not consume the subsidized products, pay for them. This is a self-evident economic truth that too many people do not fully realize consciously. Thus when train fares are subsidized, those who never ever use a train also bear part of the cost. The much touted diesel ``subsidy’’ that leaders of government from the president downwards have long trumpeted as an index of their concern for public transport users and the price sensitive haulage sector, means that petrol users, including poor three-wheeler drivers, carry the tab for the cross subsidy. So the rich man riding a luxurious diesel powered sports utility vehicle (SUV) has part of its cost paid for by three-wheeler operators.
This is the stark reality and the sooner people understand it the better. Governments, and not only this one, have for too long conned the people on fuel subsidies. It is seldom if ever admitted that a major revenue stream for the exchequer comes from the various taxes charged on fuel. When whoever is in a seat of authority talks about the cost of fuel and the sale prices, pointing out that the various types of fuel are being sold below cost, the tax component is conveniently ignored. This is the kind of spin that the people are subjected to by their leaders who heap their own plates with gravy at the cost of those they represent. A crunch time is now approaching with the recent increase in fuel prices having already forced increases in bus fares. In all probability rail fares will almost double in the very short term because the railway cannot continue to depend on the Treasury for the various handouts it needs to keep its services going at the present fares. Haulage rates are up and that reflects on the cost of everyday essentials.
There is very little chance, if any, of the rising trend in international oil prices reversing. An ever optimistic leadership relates sunshine stories about the prospects of finding oil off our shores. Even if such is the case, and there are grounds to hope this is so, it will take a very long time to exploit such a resource to the advantage of the country. What matters to ordinary people is the cost of what they must take home in their grocery bags every few days and this, already at impossible highs due to the galloping inflation unleashed by unsustainable budget deficits and money printing, is now going higher in sympathy with higher oil prices. When the president met newspaper editors and heads of the various electronic media early last week, Central Bank Governor Ajith Nivard Cabraal said that the only way rising global oil prices can be countered by a country like ours is by a sharp reduction in fuel consumption. He said that government was looking at a 25% target. President Mahinda Rajapaksa added that proposals to achieve this objective are being awaited in the short term.
We do not think our readers will brand us as cynical if we say that it is very unlikely that government will impose fuel restrictions on either the political or bureaucratic establishments that have for too long been profligate consumers of diesel and petrol at public expense. The vast number of those swanking around in high powered, fuel-guzzling vehicles on our roads, do not pay for their own petrol (or diesel). Either the government (read tax-payer including the beggar on the street who also pays indirect taxes) or their companies pick up the tab. If a 25% saving in consumption is to be achieved, a first step would be to impose an across the board 25% slashing of fuel use by the public sector. That should include everybody right down from the top to the bottom. The price deterrent now in force will lower consumption to a degree, as has been seen in the case of wheat flour in recent months. But other measures too must be imposed. One of these would be to end the gridlock traffic jams, in Colombo particularly, that compel the wasting of billions of rupees worth of fuel every day. Some practical ideas, like banning all cars on the roads during specified hours, and leaving them free for buses, and banning buses and lorries from the roads at other times, clearing them for cars has been suggested in an article we run in our business section today. It has been written by a qualified accountant now turned dry zone farmer. There are other ideas too that have been offered in that article and these certainly merit serious examination. Some, we think, can be usefully implemented.
GMR Gunaruwan said at the press conference that followed the fuel price hike that the railway charges 50 cents fare per passenger kilometer while the buses charge twice that amount. But Transport Minister Dallas Alahapperuma, who was also present at the briefing, wants the railway to keep train fares a shade below that of buses. Other anomalies also emerged during that discussion. The minister pointed out that while ordinary people paid 50 cents a passenger kilometer to travel by train, government servants paid only five cents and the railway’s own employees, there are 17,000 of them, just three cents! It is unlikely that a government demanding economies from the people in the context of spiraling global oil prices will have the political will to take away perks it gives its employees and face the consequences.
Doling out duty free vehicle permits to public servants was not done out of appreciation of the onerous work load they carry. It was all a question of soliciting their political support. Right now CEB engineers who had been excluded from the last such concession are mounting a rearguard action withholding attendance at technical committees etc. in an effort to get the perk. We would offer better than even odds that they will get what they want at this stage, or later when they ratchet up the pressure. Our governments, sadly, too often do what is convenient rather than what is right. And given that the politicians who lead them are ever mindful of their own interests, both material and political, the caravan will continue the same old way.