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Reforming fossil fuel prices in India: Dilemma of a developing economy

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  • Anand, Mukesh Kumar

Abstract

Over the period between 1990–1 and 2012–3, fossil fuel use on farms has risen and its indirect use in farming, particularly for non-energy purposes, is also growing. Consequently, both energy intensity and fossil fuel intensity are rising for Indian agriculture. But, these are declining for the aggregate Indian economy. Thus, revision of fossil fuel prices acquires greater significance for Indian agriculture than for rest of the economy. There are significant differences across crops. The crop-level analysis is supplemented by an alternative approach that utilizes a three-sector input–output (I–O) model for the Indian economy representing farming, fossil fuels, and rest of economy. Fossil fuels sector is assessed to portray, in general, strong forward linkages. The increase in total cost of farming, for a given change in fossil fuel prices, is estimated as a multiple of increase in direct input cost of fossil fuels in farming. From the three-sector aggregated economy this multiple was estimated at 3.99 for 1998–9. But it grew to 6.7 in 2007–8. The findings have stronger ramifications than commonly recognized, for inflation and cost of implementing the policy on food security.

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  • Anand, Mukesh Kumar, 2016. "Reforming fossil fuel prices in India: Dilemma of a developing economy," Energy Policy, Elsevier, vol. 92(C), pages 139-150.
    • Handle: RePEc:eee:enepol:v:92:y:2016:i:c:p:139-150
    DOI: 10.1016/j.enpol.2016.01.039
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    Cited by:

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    More about this item

    Keywords

    Agriculture; Fossil fuel; Inflation; Input–output analysis;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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