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Old 1st June 2011, 11:37   #76
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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Originally Posted by supremeBaleno View Post
True. A better option is to make the differential between petrol and diesel versions higher. Eg. currently a D version of Swift costs ~75K more than petrol. Double it to 1.5lakhs or better make it 2lakhs - this will hopefully cover the diesel-subsidy the owner will use up over the life of the car. As the cost of car increases, increase the differential proportionately. For a 10lakh car, make the diesel version 4 lakhs costlier. At 20lakhs, make it 8lakhs more and so on.

This is better than differential pricing of diesel for cars vs trucks/farms which will only give scope for corruption and to line the pockets of gas-station folks.
That discriminates users who travel less and favours users who travel more. A private vehicle rarely does 200km/day on a regular basis, while taxis and staff cars exceed 300/day. A better proposition is to have a uniform pricing policy. The day the diesel costs are realistic, there will be much less demand for personal diesel vehicles.

One repercussion of "cheap" diesel is that a lot of commodities which can be transported long distance by railways use truck, as it turns out to be cheaper and faster. Once diesel prices are realistic, a lot of goods will go back to the railways for bulk long distance transportation, and railways will tone up their act to offer faster turn around time.
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Old 1st June 2011, 11:51   #77
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

@Aroy, am not sure how it discriminates on kms travelled. You travel less, buy the petrol car which would save you a few lakhs upfront.
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Old 1st June 2011, 12:16   #78
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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That discriminates users who travel less and favours users who travel more. A private vehicle rarely does 200km/day on a regular basis, while taxis and staff cars exceed 300/day. A better proposition is to have a uniform pricing policy. The day the diesel costs are realistic, there will be much less demand for personal diesel vehicles.

One repercussion of "cheap" diesel is that a lot of commodities which can be transported long distance by railways use truck, as it turns out to be cheaper and faster. Once diesel prices are realistic, a lot of goods will go back to the railways for bulk long distance transportation, and railways will tone up their act to offer faster turn around time.
When prices of diesel go up then prices of all goods go up and so inflation goes up and cost of living goes up. So by the govt trying to save money on diesel subsidies, the aam admi ends up suffering. And no political party will be willing to do that so it will probably not happen.

Different diesel pricing for private and commercial vehicles will also be very hard to police and it may give rise to a thriving black market for diesel by commercial users buying at a cheaper rate and selling off to private users.

Just thinking aloud here, but looking at the Road tax of petrol and diesel cars in Siliguri West Bengal, i observe the following:

Maruti Ritz LXI registration = Rs 25,152.

Maruti Ritz LDI registration = Rs 25,152.

Now instead of increasing the price of diesel why not increase the registration charges of diesel cars and use that extra charge to subsidize diesel fuel?

Registration fees for diesel LDI Rs 25,152 + 25,152 = Rs 50,000 +. So the govt can use the extra Rs 25,000 per car to subsidize diesel.

The govt should only increase the registration of private cars and keep registration of commercial vehicles out of the increase, there by the cost of transport of goods and people will not be affected.

This will have a cascading effect:

1) Sale of diesel private cars will decrease, therefore point (2)
2) Usage of diesel will decrease and therefore the subsidy bill for the govt on diesel fuel will decrease.

On the negative side, I guess the sale of Indian made SUV's (Mahindras and tatas) will suffer, but my guess is that it will only affect sales in the short run and after the initial phase people will just accept that diesel Suv's will be 10% more expensive to buy and run from now on.

With Diesel usage decreasing due to less private vehicles using the fuel then the govt will not have to price petrol high as it is today, as right now, part of the price of petrol is used to subsidize diesel.

The govt can then use these savings to maybe subsidize petrol to a certain extent to help out the poor of the country who rely on their bikes and entry level cars (which are all petrols)

When petrol price will be reduced, then loss of car sale resulting from high rego cost of diesel will slowly be covered by increase in sale of petrol versions of cars.

I see a win win situation here for both the govt and the mass public.

Is my ideal fundamentally flawed? Ideas anyone?

Last edited by amrisharm : 1st June 2011 at 12:18.
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Old 1st June 2011, 12:28   #79
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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Originally Posted by amrisharm View Post
Now instead of increasing the price of diesel why not increase the registration charges of diesel cars and use that extra charge to subsidize diesel fuel?

Registration fees for diesel LDI Rs 25,152 + 25,152 = Rs 50,000 +. So the govt can use the extra Rs 25,000 per car to subsidize diesel.

The govt should only increase the registration of private cars and keep registration of commercial vehicles out of the increase, there by the cost of transport of goods and people will not be affected.
Its already been proposed but only in Delhi! Check this link - Diesel Cars Dearer on Eco Concern.

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Buying diesel cars is going to get costlier as Delhi government has proposed a 25% increase in tax at the time of vehicle registration.
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Old 1st June 2011, 12:35   #80
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

Folks. Kirit Parikh had suggested a cess of Rs.80,000 on each diesel car sold for private use. I guess he had done his homework. What stops the govt from implementing it.

Also, as for the so called subsidy, for every rupee in subsidy the collection of the same through taxes elsewhere probably costs the taxpayer Rs.5!
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Old 1st June 2011, 12:49   #81
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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And it will be the ages of motorcyle again.
I differ on the "again" part! Even now it is the age of motorcycles and the age of cars has not quite arrived!

I think we will see a proliferation of small displacement diesels such as the nano. May be even a diesel option for the Alto!
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Old 1st June 2011, 13:21   #82
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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Originally Posted by amrisharm View Post
Now instead of increasing the price of diesel why not increase the registration charges of diesel cars and use that extra charge to subsidize diesel fuel?

Registration fees for diesel LDI Rs 25,152 + 25,152 = Rs 50,000 +. So the govt can use the extra Rs 25,000 per car to subsidize diesel.

The govt should only increase the registration of private cars and keep registration of commercial vehicles out of the increase, there by the cost of transport of goods and people will not be affected.

This will have a cascading effect:

1) Sale of diesel private cars will decrease, therefore point (2)
2) Usage of diesel will decrease and therefore the subsidy bill for the govt on diesel fuel will decrease.
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Originally Posted by sgiitk View Post
Folks. Kirit Parikh had suggested a cess of Rs.80,000 on each diesel car sold for private use. I guess he had done his homework. What stops the govt from implementing it.

Also, as for the so called subsidy, for every rupee in subsidy the collection of the same through taxes elsewhere probably costs the taxpayer Rs.5!
^^ The above has a limitation that the cess will be collected only from diesel vehicles sold after the day of implementation. In this case a lot of existing diesel cars will still get the subsidised diesel at no extra cost.

IMHO, an annual tax should be levied on the diesel cars. This could be based on annual running of 12000 kms. If required, there could also be different segments where SUVs would be charged more than sedans and sedans more than hatchbacks. This will ensure that all private diesel users share the burden of subsidy and not only the new buyers.

After all as a petrol buyer, I am already paying through my nose. Why should I bear the burden of increased diesel prices for commercial use?
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Old 1st June 2011, 14:39   #83
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

I am slightly concerned going by the posts that most of people have been suggesting diesel as an option assuming that govt will never deregulate it.

Dont believe it, take my word. Govt will deregulate it slowly in fact by this time next year expect diesel will be deregulated.
Consider this, govt is spending around Rs 8/ltr of diesel sold. Dont think they can continue to afford that with the ratio of Diesel car sales ever increasing.

Point is Diesel, car is an escapist route, its not a solution. Relying on diesel will take one nowhere.

Accept it, it will happen one day, all the economist seem to suggest this move. Thats the only way out.

Quote:
Originally Posted by supremeBaleno View Post
True. A better option is to make the differential between petrol and diesel versions higher.
Thats a good idea only drawback is the more differential it makes the more difficult it is for the govt to deregulate the prices.
Imagine, all the people who paid Rs 1.5L more will not keep quite if Govt deregulates its on some day.

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Originally Posted by amrisharm View Post
When prices of diesel go up then prices of all goods go up and so inflation goes up and cost of living goes up. So by the govt trying to save money on diesel subsidies, the aam admi ends up suffering.
I have a different opinion. Diesel deregulation, I agree has an impact on inflation etc. But thats short term. Within 6 months things will fall in place once deregulated.
The aam admi will be affected for 6 months for sure. But later on, once things get setteled the effect will be minimal.
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Old 1st June 2011, 14:51   #84
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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Originally Posted by xingamazon View Post

I have a different opinion. Diesel deregulation, I agree has an impact on inflation etc. But thats short term. Within 6 months things will fall in place once deregulated.
The aam admi will be affected for 6 months for sure. But later on, once things get setteled the effect will be minimal.
if you are saying that people will adjust to the higher prices in six months it is true, People will even adjust to hell in six months.

I agree with all the other points you made.
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Old 1st June 2011, 15:16   #85
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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Originally Posted by xingamazon
Imagine, all the people who paid Rs 1.5L more will not keep quite if Govt deregulates its on some day.
This differential pricing is intended as a deterrent, meaning we don't expect people to buy diesels at such a high premium. And even if they do, they would have no one else to blame than themselves, if diesel prices are de-regulated later.

Quote:
Originally Posted by xingamazon
The aam admi will be affected for 6 months for sure. But later on, once things get setteled the effect will be minimal.
I don't think this is a simple case of adjusting. If so, previous governments would have done this.

Last edited by supremeBaleno : 1st June 2011 at 15:20.
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Old 1st June 2011, 20:54   #86
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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Originally Posted by xingamazon View Post
I am slightly concerned going by the posts that most of people have been suggesting diesel as an option assuming that govt will never deregulate it.

Dont believe it, take my word. Govt will deregulate it slowly in fact by this time next year expect diesel will be deregulated.
Consider this, govt is spending around Rs 8/ltr of diesel sold. Dont think they can continue to afford that with the ratio of Diesel car sales ever increasing.

Point is Diesel, car is an escapist route, its not a solution. Relying on diesel will take one nowhere.

Accept it, it will happen one day, all the economist seem to suggest this move. Thats the only way out.


Thats a good idea only drawback is the more differential it makes the more difficult it is for the govt to deregulate the prices.
Imagine, all the people who paid Rs 1.5L more will not keep quite if Govt deregulates its on some day.


I have a different opinion. Diesel deregulation, I agree has an impact on inflation etc. But thats short term. Within 6 months things will fall in place once deregulated.
The aam admi will be affected for 6 months for sure. But later on, once things get setteled the effect will be minimal.
No body is questioning that diesel will be de-regulated. But like the many many stories circulating in business mags, it will be de-regulated with an upper ceiling price. And why u ask?

Simple, diesel price is rise will affect the whole economy in its entirety, just to give u a small example of my line of work in construction.

If diesel were to be deregulated and it goes to cost Rs 60/ltr,
1) Then cost of raw materials like cement, rods, bricks will go up.
2) transportation of these raw materials to me will go up
3) Labour wage will go up.
4) And when the construction is complete the flat/room sale/rent price will go up.

And this is the case with each and every industry from agriculture, automotive, manufacture, service and so on. That is why Diesel price has been protected so vigorously.

So Price rise of diesel is nothing like price rise of petrol where the automobile user is affected and that is about it. When diesel prices go up the whole economy is affected and each and every person in this country is affected irrespective of whether or not that person drives a diesel car or not.

Sorry for the lecture in macro-economics

Last edited by amrisharm : 1st June 2011 at 20:58.
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Old 1st June 2011, 21:03   #87
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

The govt should deregulate both petrol and diesel - and at the same time do away with the ridiculous amount of tax on both.
Actually our tax structure needs to change - we all know indirect taxing (on essential commodities) is easy and foolproof way to earn money by govt., but it hurts rich poor alike - more the poor than the rich. Thus we should have a stronger and clean (for heavens sake do away with deductions, any kind of it) direct tax structure to collect the correct amount of direct income tax everyone owes to the govt. , and chuck out the lame indirect taxes.
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Old 2nd June 2011, 09:00   #88
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

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So Price rise of diesel is nothing like price rise of petrol where the automobile user is affected and that is about it. When diesel prices go up the whole economy is affected and each and every person in this country is affected irrespective of whether or not that person drives a diesel car or not.

Sorry for the lecture in macro-economics
Absolutely true.

Also, the percentage of diesel consumption by cars is very little compared to overall diesel consumption in country. It is the impact of diesel price rise on economy on whole the authorities and decision makers look at and not the lobbying of diesel car makers as some of the people like to say.

While increasing the price of diesel/petrol to cover the so-called deficit, the Government should also rationalize the tax structure so the impact is more moderate.
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Old 2nd June 2011, 09:37   #89
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

The subsidy on diesel is coming from my tax money which is taken from petrol and otherwise.

I dont want to pay for your diesel, guys.


Having said this, I feel that the current crude prices are unsustainable and will cool off sooner than later. Perhaps in a years time we might see far lower petrol prices as crude will most likely cool down.
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Old 2nd June 2011, 09:54   #90
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Default Re: How will the market change if Petrol and Diesel prices sky-rocket

Sales figures for May 2011 is a good pointer to what is going to happen with petrol prices going up. Honda, the petrol car maker, suffered big time with sales falling by almost 45%. Rest of companies had to do with miniscule (1-2%) growth. Meanwhile Hero Honda, Bajaj and TVS had a great time, with their sales increasing by more than 15%.
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