New Delhi, August 14
The issue of subsidy for diesel cars tends to emerge as a talking point in the auto industry, now and then. This is especially true, as petrol prices have been rising and have now been decontrolled. Sales of diesel cars has thus been on the upswing.

In the long term, the only option may be for the government to resort to increasing the Excise duty on passenger cars and MUVs and SUVs, with diesel engines. This will ensure that government gets the revenue which it subsidises through diesel.

The issue flared up recently when during a debate in Parliament on inflation and oil prices there were indications that the government was looking at measures to cut down on the diesel subsidy for cars.

However, a couple of days later, Finance Minister Pranab Mukherjee clarified that there were no proposals for introducing dual pricing for diesel or increase in duties for bridging any perceived shortfalls in tax revenues, “as has been highlighted by a speculating media in the past couple of days”.

Mukherjee went on to say that in this context that the process of economic reforms in India was irreversible and that the economic stakeholders had no reason to fear introduction of any regressive policy measures.

Jnaneswar Sen, senior Vice President, Honda Siel Cars India told The Tribune, “Diesel has been subsidised primarily to benefit the commercial and farm segments that directly impact the economy and inflation. If an effective mechanism is put in place, car manufacturers will operate in a level field and the choice of fuel variant will depend on the customers.”

During the Parliament debate, the FM said that 15 per cent of diesel consumption goes towards cars and multi-utility vehicles.

The Centre for Science and Environment (CSE) had welcomed the proposed move and said that there was a need for a fiscal policy to check that the car segment is not all diesel. Revenue losses from luxury consumption of diesel in cars must also be earned back.

CSE said that in 2000, diesel cars were only 4 per cent of India's new car sales. Within a decade, they have increased to 36 per cent and this is expected to be 50 per cent soon.

Public transport of goods and passengers will have to continue to get subsidy, including railways. Presently, diesel subsidy is over Rs 50,000 crore per annum.

Says auto industry veteran, Ramesh Adige, “The thermodynamic efficiency of diesel engines is 20% more than petrol engines. From that angle, it makes sense to have diesel-driven vehicles which give more km per litre as long as the diesel engines meet the emission norms with the availability of clean diesel fuel”.

Dual pricing has not succeeded when tried as an experiment in different parts of the world. In this situation, distributing diesel at different prices at the pumps may not work because it will lead to malpractices and diversion.

Tractors, trucks and buses will be able to get it at one price while cars will get it another price which may not work. If higher excise duty is introduced, then the downside is that manufacturers of diesel-driven cars can feel let down by the sudden change of policy.

Huge investments have been made in diesel engineering and technology and for setting up lines in factories and other infrastructure, including at dealers-end and ancillaries.

Says Adige, “And this, at a time when the global economic situation is so uncertain. In this regard, under no circumstance can the government take action without consulting all the stakeholders.” 

Hyderabad, August 14
An ambitious ‘Kisan’ Special Economic Zone in Nellore district of Andhra Pradesh has run into rough weather with environmentalists and animal lovers raising concerns over the proposal to set up mega dairies in collaboration with a foreign company as part of the SEZ.

The establishment of mega dairies in the coastal district involved several environmental and animal welfare risks and possible violation of rules, the Chairman of the Animal Welfare Board of India (AWBI) Dr RM Kharb said. The AWBI is a statutory body of Government of India, working under the aegis of Ministry of Environment and Forests.

The AWBI Chairman has addressed a letter to the promoters of Kisan SEZ raising environmental concerns over the proposed project by a consortium of IFFCO, the New Zealand-based dairy company, Fonterra, and an Indian company Global Dairy Health.

The letter was in response to a petition by the Federation of Indian Animal Protection Organizations (FIAPO), an umbrella body of Indian animal welfare groups across the country.

“The proposed project is a corporate farm where animals will come under tremendous stress. The animals will be kept at high stocking densities which might result in them contracting diseases which could lead to an increased likelihood of emergence of new diseases," Kharb said.

FIAPO Convenor Arpan Sharma said: “Indian standards lag behind those of some of the developed nations with progressive animal welfare standards not being implemented by foreign companies in Indian markets. This is unfair to Indian consumers,” he said.

In such mega dairies, cows are typically kept almost exclusively indoors with little or no access to natural surroundings. Cows farmed thus bred to produce unnaturally large amounts of milk.

Sharma said Lincolnshire in th UK had recently refused permission to a cattle farm similar to the one being proposed in AP.

New York, August 14
Reflecting the uncertain economic conditions in the world's largest economy, as many as eight US banks on an average are going out of business every month.

A whopping 64 American banks have closed down so far this year, translating into an average of eight closures every month, according to official data.

This month alone has seen the shutting down of three banks, after 13 entities went belly up in July.

The Federal Deposit Insurance Corporation (FDIC), which insures deposits of around 8,000 American banks, said three entities — The First National Bank of Olathe, Bank of Whitman and Bank of Shorewood — were closed down in August.

Closure of these three banks would cost the Federal agency as much as $277 million.

The US, which was recently stripped of its coveted 'AAA' rating by S&P, has been grappling with banking sector woes since the financial meltdown in 2008.

A staggering 157 banks failed last year, which is the highest in two decades.

Last year saw the highest number of US banks biting the dust since 1992, when the savings and loan crisis had pushed a whopping 179 entities out of business.

The count of bank collapses in 2010, was much higher than 140 failures witnessed in 2009.

Persistently high unemployment levels coupled with sluggish economic recovery are hurting the businesses of small and medium American banks, especially with rising defaults.— PTI

New Delhi, August 14
The government has raised the export price of onion by $45 per tonne to $275 a tonne in order check prices which have doubled in the last one month in the retail market and are currently ruling at Rs 20 per kg.

The Minimum Export Price (MEP) of two superior varieties — Krishnapuram onions and Bangalore Rose onions — have been increased by $50 per tonne to $400 per tonne. These two South Indian varieties were spared from the hike last time in July. The onion MEP has been raised to discourage exports and boost the domestic supply, a official said.

The decision comes in the backdrop of rising onion prices, which were stable during April-June and had even fallen to Rs 10 per kg.— PTI

The government seems to be worried also about high food inflation, which surged to a four-and-half month high of 9.9 per cent for the week ended July 30, due to costlier onions, fruits, vegetables and protein-based items.

The onion prices went up by 36.62 per cent year-on-year, as per wholesale-based inflation data.

In December last year, the government had imposed a ban on onion exports after its prices had skyrocketed to Rs 80-85 per kg in the retail markets across the country. The export ban was lifted in February this year after the cost eased.

While opening export, the MEP of onions was fixed at USD 600 per tonne. In subsequent months, MEP was revised downwards several times to USD 170 per tonne level.

With prices again inching upwards, the government has increased MEP three times since June to tame prices, and now it stands at USD 275 per tonne.

Traders at Azadpur in the national capital (Asia's biggest wholesale fruits & vegetables market) said onion prices have increased on lower arrivals as the stock from last year's crop is getting exhausted and prospect of supply of new crop, which starts from September, may get delayed.

Onion which was selling at Rs 10 a kg a month back, soared to Rs 15 per kg last week before touching Rs 20 a kg in the Delhi and NCR, traders said.

India produced over 14 million tonnes of onion in the 2010-11 season.

The exports dropped by over 31 per cent in 2010-11 fiscal at 12.89 million tonnes against the year-ago period. 

Q A question was raised by Sh HS Gupta of Punjab State Electricity Board under the heading 'Gratuity' in the column ‘Tax Advice’ regarding exemption limit of Income Tax as 'Whether Income tax is deductible from the enhanced amount of Death cum Retirement Gratuity that is in excess of Rs 3.50 lakh to 10 lakh from the retirees of Punjab State Electricity Board who retired between the period 1/1/2006 to 23/5/2010 for which the Tax advisor has only advised that in case Gratuity is payable under the Tax Rules 10 (10)(i), such Gratuity would be exempt from Income tax in its entirety. It should be cleared specifically that whether pensioners of Punjab State Electricity Board who retired between the period 1.1.2006 to 23.5.2010 are entitled for exemption from Income tax in its entirety from the enhanced amount of Death cum Retirement Gratuity in excess of Rs. 3.50 lakh to 10 lakh or not? As I am not aware whether such retirees are covered under Tax Rules 10(10)(i) or 10(iii), matter should be decided once for all. — Vishal Kansal