New Fuel Policy

The oil crisis - the unprecedented rise in the prices of petroleum products - has hit nearly all countries, rich and poor. But the developing world, many of whose countries are net importers of oil, has been the hardest hit. Sri Lanka is no exception.

Sri Lankan Governments have been cushioning the effect of high oil prices through subsidies, so that the consumer had to pay less than market price at the fuel pumps. But this is no longer viable in the present economic climate and the Government is gradually reducing such subsidies.

But that alone will not suffice. This is why the Government is drafting a new Fuel Policy that will recommend certain other measures designed to save fuel and hence the massive oil import bill. We hope this will be a comprehensive set of laws that will address the issue thoroughly.

One such issue is whether the import of vehicles with very large engine capacities should be stopped or restricted. We are told that this is one issue being scrutinised by the authorities.

There has already been a considerable drop in their imports due to the very high taxes and levies imposed, totaling more than 400 per cent of the CIF value. High fuel prices are also driving many car buyers to opt for smaller cars, instead of SUVs or high-engine capacity cars.

Ours is a democracy. The freedom of choice is a fundamental right. If a certain person wants to buy a vehicle with a five litre gasoline engine and if he or she is paying all taxes and levies, there should be basically no problem with that.

But will have to suffer at the pump. And the authorities will also have to decide the cut-off point for higher engine capacities - is it 2 litres, 3 litres or 4? Will both petrol and diesel vehicles be included?

Today’s high capacity engines are far more fuel efficient and clean than they ever used to be. Another factor to consider is that certain privileged individuals have imported high capacity engined vehicles duty free and it would be unfair by the public to cut off access to such vehicles as long as the duties and taxes are paid.

The proposed fuel policy should be enlarged to encompass the whole issue of vehicle imports. The authorities should grant duty concessions for the import of all-electric and hybrid vehicles which consume little or no fossil fuels. The local assembly of such vehicles should be encouraged. More concessions and incentives should be granted to all local motor vehicle manufacturers and assemblers.

There should also be a revision of the tax structure on diesel vehicles, which is clearly out of sync with the rest of the world. It longer makes sense to impose very high taxes on diesel vehicles as pump prices are only marginally lower.

After all, the whole idea of imposing high duties on diesel vehicles was to prevent private motorists from enjoying lower prices at the pump.

On the other hand, today’s diesel vehicles are ultra-clean and much more fuel efficient. Kilometre-per-kilometre, diesels outperform petrols easily. In other words, some diesel cars do an amazing 1,000 kilometres on one full tank, whereas a petrol car would do around 600 km.

Imagine the savings if most of our cars were diesel-powered, as in Europe and increasingly, India, where taxes on both varieties are more or less equal. Another factor that should be taken into consideration by the planners is the unrestricted import of reconditioned cars, a glorified term for used cars.

These cars have been used in another country for at least three years and are not in the best mechanical condition. It would be far better to phase out such imports and reduce duties on brand new vehicles to make them more affordable. That will benefit not only car buyers but also the environment. It will also lessen the used spare parts import bill. Higher sales will translate into more revenue for the Exchequer.

That said, the best solution to the present crisis is an improved public transport system. If Sri Lanka had clean, efficient and fast trains and equally good, uncrowded buses many motorists will opt to keep their cars at home. The proposed Park and Ride concept, whereby drivers can park their cars and take an air-conditioned shuttle to the City, is a step in the right direction.

But it would not be prudent to ask the Government alone to act on the fuel crisis. The public also has to fall in line to tide over the crisis. One can start with simple things. Just walking to the junction instead of taking the car, reaching for the phone instead of the car keys, car pooling and restricting non-essential travel to off-peak hours/weekends are among them. This is a crisis that we have to face collectively as a nation and some sacrifices are called for.