Time and again it has been proven that government interventions into market economy do not necessary solve problems but more often than not, create new ones.
For instance, profit-based motives, greed or just self-interest will ensure that the intended beneficiaries of a subsidy policy will have to compete with profiteers and their like thus defeating the subsidy's original purpose.
The latest diesel fiasco shows that disproportionate subsidies have been exploited by profiteers out to make a fast buck (millions) from the government.
Even without the entry of profiteers, our present system did not cater for many small-time industrial users, who admittedly have been breaking the law technically almost daily.
Imagine a factory with only one or two diesel shovel loaders or fork-lifts. The actual amount used actually cannot justify the set-up of its own storage tank within the factory compound. But the law requires it, which involves certain specifications as to the size, construction, cemented floor (to prevent seepage due to spillage) and location (to prevent fire) and a necessary permit for diesel storage and so on.
Having done all that is required, it was then found that the diesel tankers will only deliver to locations that require a minimum of some 2,000 litres! So for practical reasons, it is back to square one, which is to use a 20-litre container on a pick-up truck to buy what is needed daily.
With the present shortages and frayed tempers at petrol stations, such conduct would appear to be opportunistic. But what choice do small industries have? They are buying for their own use and are willing to pay the higher industrial price, if only to reduce the hassles.
Enforcement is not likely to be effective and is definitely not a long-term solution. The Domestic Trade and Consumer Affairs Ministry should consider either doing away with the diesel subsidies or at least, reduce the price differential to make it not worthwhile to profiteer.
It looks like the main reason for the diesel subsidies is to keep transport charges and prices of goods low. But intervention into market forces can only delay, not prevent, the effects of inflation.
Subsidies promote unwanted profiteering at great expense to the government and greatly inconvenience transporters and small industries. Isn't it better to leave the whole matter to the market forces of supply and demand?