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Singh vs Dirty Energy Subsidies

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"Singh vs Dirty Energy Subsidies"

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Last December I took note of Steve Coll’s argument that Indian Prime Minister Manmohan Singh is the great underrated statesman of our time. If he manages to hold firm in his campaign against dirty energy subsidies that’ll be another chapter in building the case:

Indian cities limped back to life after a nationwide strike over fuel prices grounded flights, shut offices and triggered sporadic violence, forcing the government to defend cuts to subsidies that had protected the poor.

The main opposition Bharatiya Janata Party and communist parties, which independently called nationwide 12-hour stoppages until 6 p.m., said the stoppage has been a success as truckers, shopkeepers and government workers backed them to protest Prime Minister Manmohan Singh’s June 25 decision to stop subsidizing gasoline and diesel, a move to reduce spending that spurred the budget deficit to a 16-year high.

Subsidies of this sort are all-too-common around the world but especially in developing nations. And while it’s true that it’s relatively more difficult for poor people to adapt to any kind of change, that’s simply because everything is harder for the poor. The distributive impact of gasoline subsidies in a country like India where most people are too poor to afford a car is clearly regressive. And in any country at any state of development you could always cancel costly dirty energy subsidies and plow some of the savings into targeted financial assistance for poor people. In the long run, subsidizing pollution only hurts economic growth while damaging air quality and public health.

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