The diesel price hike gives the correct signals
The notion that diesel demand is perfectly inelastic is wrong. We know that in the mid-seventies, when India followed a high energy price policy after the first energy shock, POL demand was stagnant and the country is regarded as having been very successfully in fighting the crisis. The price of an input is a cost but it also gives a signal for the resource use and that will have salutary consequences, including for the environment.
There are two aspects that need attention. Every fuel policy report from the Chakarvarty Committee onwards, some of which I have worked on, has asked for the rationalisation of diesel prices. One aspect is the provision of cooking energy in the hill areas because kerosene will be substituted by the cutting of down trees. A well-targeted Aadhaar-based supply of the fuel to these small but important populations is needed. A recent version of this is
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