The President's advisers: Are they telling him the truth?
Harsha de Silva, Ph.D.
Imagine the song... "So this is Christmas... and what have you done?" I am not referring to the famous song by John Lennon and Yoko Ono but what our Government has done to our petrol price gift sent to us by SC; Santa Claus alias, in this context, Supreme Court!
What is wrong with taxing a few rich folks to subsidize the rest?
Addressing a group of "religious dignitaries, intellectuals, professionals, politicians and artistes" the other day, an emotionally charged President questioned why the Government should attempt to please a few at the expense of many. He thundered "Any decision on the prices of essential items has to be taken with responsibility and concern for the actual needs of the people. The needs of a mere 4 percent of people who use petrol for cars could not supersede the needs of more than 90 percent of the people who travelled by bus and train" [www.priu.gov.lk]. So, the logic is if the contentious LKR 22 per litre additional profit on petrol on such a small percentage of population can give the Government huge revenues [some LKR 15 billion in 12 months] to help finance the war, dole out subsidies and undertake development projects, then who can find fault with the President? No one! Perhaps that is why the audience applauded. But the question is whether the President's claim on "actual needs of the people" is factually accurate. The answer is, unfortunately, no.
Petrol sales are 16 percent
in volume
According to the 2007 Central Bank Annual Report, CPC and LIOC sold 518,000 metric tons (MT) of petrol and 1,766,000 MT of diesel last year. Given the total sale of 3,802,000 MT including kerosene, furnace oil, avtur and naphtha, petrol sales amounted to 14 percent as opposed to diesel sales of 46 percent and furnace oil sales of 26 percent by weight. But the comparison is not that straight-forward because fuel is actually retailed not in kilograms but in litres. So when the transformation is done, petrol sales in volume becomes 16 percent. The next step is to see if this 16 percent is consumed by a mere 4 percent of ‘rich car’ owners.
But by use, it could be as high
as 40 percent
Let us now consider the number of households that own some mode of transportation to analyze the car ownership figure and see if perhaps that is the elusive 4 percent figure. It is estimated that Sri Lanka has approximately 4.8 million households as at today and according to the latest available Consumer Finance and Socio Economic Survey for 2003/04, 16.3 percent of these households owned a motor cycle, 5.8 percent owned a car and 2.8 percent owned a three wheeler. As we all know, these numbers have been growing rapidly over the years. Using Department of Motor Traffic data we find that motor cycles, cars and three wheelers grew at an average 12 percent, 7 percent and 21 percent respectively between 2003 and 2007. So by simply extrapolating [ignoring multiple vehicle ownership by households] we find that it is likely that 26 percent of the households in Sri Lanka own a motor cycle, 8 percent own a car, and 6 percent own a three wheeler. If only considering the urban sector, the big ownership difference is in cars where perhaps as high as 20 percent of the households own a car; which amounts to about 125,000 units. So by going by these numbers it is impossible that the 4 percent figure of implied "rich petrol users" can be accurate by a long shot; it is at least 26 percent of households who use motorcycles; who cannot be classified as "rich".
The calculation does not end there. Using the Department of Motor Traffic statistics, we can calculate the indirect users. Assuming that the 360,000 three wheelers in use undertake 5 trips on an average day with 2 passengers [this is based on casual conversations with three wheeler drivers] we find that 3.6 million people use three wheelers everyday. Add to that 2 persons on a bike [conservative estimate as most of the time we see more than 2 people on a motorbike] on the 1.6 million motor bikes daily; that is 3.2 million people. Finally add 2 people per car for the 360,000 cars in use; that is another 720,000. What is the total figure of direct and indirect petrol users in Sri Lanka? The answer is 7.5 million people. Assuming 19 million people in Sri Lanka between the ages of 5 and 75, the figure is 40 percent.
Ten times the "mere 4 percent" figure of the President.
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Harsha de Silva, Ph.D.
Imagine the song... "So this is Christmas... and what have you done?" I am not referring to the famous song by John Lennon and Yoko Ono but what our Government has done to our petrol price gift sent to us by SC; Santa Claus alias, in this context, Supreme Court!
What is wrong with taxing a few rich folks to subsidize the rest?
Addressing a group of "religious dignitaries, intellectuals, professionals, politicians and artistes" the other day, an emotionally charged President questioned why the Government should attempt to please a few at the expense of many. He thundered "Any decision on the prices of essential items has to be taken with responsibility and concern for the actual needs of the people. The needs of a mere 4 percent of people who use petrol for cars could not supersede the needs of more than 90 percent of the people who travelled by bus and train" [www.priu.gov.lk]. So, the logic is if the contentious LKR 22 per litre additional profit on petrol on such a small percentage of population can give the Government huge revenues [some LKR 15 billion in 12 months] to help finance the war, dole out subsidies and undertake development projects, then who can find fault with the President? No one! Perhaps that is why the audience applauded. But the question is whether the President's claim on "actual needs of the people" is factually accurate. The answer is, unfortunately, no.
Petrol sales are 16 percent
in volume
According to the 2007 Central Bank Annual Report, CPC and LIOC sold 518,000 metric tons (MT) of petrol and 1,766,000 MT of diesel last year. Given the total sale of 3,802,000 MT including kerosene, furnace oil, avtur and naphtha, petrol sales amounted to 14 percent as opposed to diesel sales of 46 percent and furnace oil sales of 26 percent by weight. But the comparison is not that straight-forward because fuel is actually retailed not in kilograms but in litres. So when the transformation is done, petrol sales in volume becomes 16 percent. The next step is to see if this 16 percent is consumed by a mere 4 percent of ‘rich car’ owners.
But by use, it could be as high
as 40 percent
Let us now consider the number of households that own some mode of transportation to analyze the car ownership figure and see if perhaps that is the elusive 4 percent figure. It is estimated that Sri Lanka has approximately 4.8 million households as at today and according to the latest available Consumer Finance and Socio Economic Survey for 2003/04, 16.3 percent of these households owned a motor cycle, 5.8 percent owned a car and 2.8 percent owned a three wheeler. As we all know, these numbers have been growing rapidly over the years. Using Department of Motor Traffic data we find that motor cycles, cars and three wheelers grew at an average 12 percent, 7 percent and 21 percent respectively between 2003 and 2007. So by simply extrapolating [ignoring multiple vehicle ownership by households] we find that it is likely that 26 percent of the households in Sri Lanka own a motor cycle, 8 percent own a car, and 6 percent own a three wheeler. If only considering the urban sector, the big ownership difference is in cars where perhaps as high as 20 percent of the households own a car; which amounts to about 125,000 units. So by going by these numbers it is impossible that the 4 percent figure of implied "rich petrol users" can be accurate by a long shot; it is at least 26 percent of households who use motorcycles; who cannot be classified as "rich".
The calculation does not end there. Using the Department of Motor Traffic statistics, we can calculate the indirect users. Assuming that the 360,000 three wheelers in use undertake 5 trips on an average day with 2 passengers [this is based on casual conversations with three wheeler drivers] we find that 3.6 million people use three wheelers everyday. Add to that 2 persons on a bike [conservative estimate as most of the time we see more than 2 people on a motorbike] on the 1.6 million motor bikes daily; that is 3.2 million people. Finally add 2 people per car for the 360,000 cars in use; that is another 720,000. What is the total figure of direct and indirect petrol users in Sri Lanka? The answer is 7.5 million people. Assuming 19 million people in Sri Lanka between the ages of 5 and 75, the figure is 40 percent.
Ten times the "mere 4 percent" figure of the President.
|
Read full article at
http://www.dailymirror.lk/DM_BLOG/Sections/frmNewsDetailView.aspx?ARTID=36099
