#SUBSIDY
IS
IT SUBSIDY - 1
A retail vegetable seller normally goes to the
wholesale vegetable market and buys a load of tomatoes and brings them to his shop.
He sorts them into say 3 heaps – one – the larger and sturdy ones, - two – the unblemished
but average sized, - three – the smaller and softer ones.
Now if his purchasing price of the tomatoes averaged
Rs 10/= per kilo, he would sell his heap A at probably Rs 20/= a kg, heap B at probably
15/= per kg, and heap C at probably Rs 8/= a kg. Is a subsidy being given on
heap C ? By him / by the Vegetable
sellers association / by the citizen’s welfare group / by any other agency ? The
answer is NO. He is keeping a differential pricing according to the type of
tomatoes, so that he is able to clear all his goods accumulated in the
transaction. His pricing is such that the better variety costs more, the
average costs average, while the lesser value costs less. Besides it also suits
the pockets of different customers is unintended. The intention is pure
business – to clear stocks !
This practice is adopted for all vegetables and
fruits. The garment industry sells ‘seconds’ at substantially lower price; the
biscuit industry sells broken biscuits loose by weight at throwaway prices; and
so on. In all the above cases no subsidy is involved, but the customer gets
goods according to his needs and pocket, while the seller clears all the goods
making profit along the way.
Subsidy claim No 1. Every year our Postal Deptt claims that it is
suffering huge losses on postcards and has to keep issuing them by way of
subsidy. Now postal articles like a Registered letter at min Rs 22/= or a Speed
Post at min Rs 39/= come under heap A and a hefty charge is levied. An ordinary
letter comes under heap B at Rs 5/=, and a postcard having very limited space
for writing and no privacy comes under heap C at Rs 0.50
As in vegetables, the premium service (registered
letter etc.,) costs the highest, the average service (ordinary letter) costs
average, while the economy service costs less. This also is a classic example
of differential pricing. Some items priced high and some low to suit different needs,
customers and pockets, while the department does not suffer any losses as the
same postman on his rounds delivers the registered letter / letter or post
card.
Then what is all the brouhaha on subsidy about ? It is
for you to decide whether the claim of subsidy is true or false.
Subsidy claim No. 2. The government has been in an overdrive and sustained drum-beating on subsidy for cooking gas, and also limiting its use.
Providing the customer with a LPG
cylinder involves only filling the cylinder with a gas which is coming out as a
waste-product of oil drilling. The gas is not manufactured, or you can say that
no manufacturing is involved. It is the same as digging out coal and supplying
it to the consumer or collecting river sand and supplying it for building
construction work.
Every year, the oil industry burns off
up to 170 billion cubic meters of natural petroleum gas released in the petroleum
exploration & extraction process, according to a new report commissioned by
the World Bank. The practice, known as gas flaring, not only harms the
environment by emitting some 400 million tons of carbon dioxide globally, but
is also wasteful of a cleaner energy source. It may also be noted that
exploration is done mainly for petroleum and in very rare cases for this gas.
Huge amounts of this gas are “flared”
i.e. burned off since it could not be used. Gas supply is in excess of what is
being used. Amount used in LPG cylinders is a fraction of what is available. Rather
than simply burning it off, economists support exploiting the resource by converting
it to LPG, transporting it via pipelines as industrial fuel, or to generate
electricity.
The cost involved is only of bottling,
and transporting the cylinder. There is no shortage of gas. In the seventies
and eighties the shortage used to be of the steel cylinders, as there were only
one or two manufacturers in India
As is
clear from the above – LPG (heap C as in vegetables) involves no manufacturing,
only bottling and transportation All exploration & production costs of
petroleum are built into the cost of the premium product Petrol & Diesel (heap
A) and its bye products – kerosene / wax / petroleum jelly / bitumen etc..
THEN
WHAT IS THE SUBSIDY BEING CLAIMED FOR BY THE OIL COMPANIES ? Also since there is no shortage of gas – WHAT IS THE ISSUE OF A LIMIT TO THE USAGE
TO FEW CYLINDERS A YEAR ?
It is for you to decide whether the claim of subsidy
is true or false.
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Some manufacturers of various consumer goods have
stopped manufacturing economical goods, and started selling only costlier goods
to maximize profits. The government seems to have dropped its outlook of socialism
and is becoming a capitalist oriented country.
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