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Asia Pulse
February 22, 2011

The Indian Planning Commission yesterday pitched for a tax on polluting energy sources like petrol and diesel to cross subsidise the clean energy initiatives in the country.

"There is very strong case for introducing cross subsidy by charging a cess on polluting energy specifically in order to subsidise non-polluting energy," Deputy Chairman of Planning Commission Montek Singh Ahluwlia told a conference on Climate Change.

"Unless we make it (non-polluting energy) self sufficient, the promotion of clean energy like wind and solar will all become subject of the actual amount of subsidy that can be provided in the budget," Ahluwalia said.

The government, he said, "has taken a very important step in this direction last year by introducing a five per cent cess on coal whether imported or domestic to create green energy fund which will be used to support either research or implementation of such projects."

According to him in the absence of such tax on polluting energy like petrol and diesel, the clean energy initiatives in the country would have to be dependent on government subsidy. In that case it had to compete with plethora of subsidies in other areas.

"We have a lot of humane social subsidy requirements for health, livelihood and education. If we add on an additional subsidy requirement for climate change...we will not get the full amount," he pointed out.

Ahluwalia also stressed on the need for aligning country's energy prices with the global rates and said, "because the climate change is ultimately caused by the use of fossil fuels, one critical issue is that we must have correct energy prices."

"The underpricing of energy based on fossil fuels in whatever form is only an encouragement to use more energy. It would be impossible in my view to achieve the objective of (programmes on) climate change, if they are not embedded in overall policy framework where energy prices are not subsidised."

Ahluwalia also stressed on the need for raising user charges on water for activities like its recycling and treatment.

The amount of water used by poor is very very low and most of the underpricing of water is used by the non-poor, he added.

"We need to raise user charges to cover some of the activities. The cost of recycling water should be borne by the users so that poor can be insulated from bearing such costs," Ahluwalia said.


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