Fuel subsidies in India
India, a country with a population of over 1 billion, faces skyrocket fuel prices that much of the world doesn’t. In 2014, India called off subsidies on diesel, which had ballooned to $9.6 billion in March of that year. Subsidies are provided when energy consumers pay prices that are lower than the cost to supply them. So, why exactly did India call off those subsidies? The simple answer is that it was getting ridiculously expensive for the government to provide them. In recent years, people in India would drive cars fueled by petrol, which made sense for the government to subsidize diesel while deregulating the price of petrol. Though as of late, most drivers have switched to diesel fueled cars, which skyrocketed the price to subsidize diesel. Therefore, the current issue with India removing the subsidy of diesel is that things like farm equipment that aid in producing food have become expensive to fuel. This, in turn, has caused an increased inflation on the price of food and other goods.
In my opinion, the only way the government can solve this issue in the long-term would be to encourage citizens to drive more fuel-efficient cars. In addition, they should also look into alternate power sources. Subsidizing fuel isn’t a long-term solution to keeping prices low, in my opinion. Subsidizing diesel has taught them that doing so would only encourage consumers to switch to whatever is cheaper.