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Old 29th September 2011, 00:09   #46
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Default Re: Petroleum Pricing in India ? Debate

Petroleum pricing and even diesel pricing in india is high because of taxes and nothing else.

Now in india because of the way system is and because direct taxation is a joke the govt does not have a choice but to tax this widely used commodity heavily.

Remember that in india everybody tries to evade tax. Nobody pays the proper income tax or property tax/registration tax etc. especially the business folks.

What choice does the govt have? A personal means of transport is still a luxury in large parts of india and if a person can afford this he should be able to take the extra tax also.

This is the view from an oil ministry IAS guy who i once met in a flight and in his view the state and central govts will have to keep the taxes high if the salaries of our babus have to be paid.
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Old 29th September 2011, 08:52   #47
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If we weigh the prices of fuel and cars against the personal incomes of the salaried class then a person at a certain level in an organization today can afford to buy a bigger car and drive lot more miles compared to three decades ago at the same level. Having said this I would be glad if I have to pay less for my car and fuel today so that I can go on longer drives; but I am not sure if my old bones will let me do so. Like everybody else, I too feel the pinch of a higher price especially that I have to shell it out of my pension.

The petrol price differs not only from state to state, but also from town to town within the same state due to local taxes such as say octroi. No oil company will give out of its own pocket; that is the law of Nature. So, if the oil companies were to make prices uniform across the whole country they would take something from say my pocket and give to someone in say Bangalore. Is that fair? I think it is perfectly fair to complaint against rising taxes and rising prices. That is the law of Nature; also called as ‘back-pressure’. But it is not fair to transfer one’s burden to some other shoulder.

No offence has been intended in my above views. I must also hasten to point out that the ratio of end-user price to ex-refinery price is much lower today than three decades ago. This means the tax fraction has reduced. As a nation, we need to raise our productivity in agriculture and industry, and to reduce it in population. However, while we work harder we must keep complaining as this only serves to make things better; seriously.

PS: I did not use any smiley as the count would go beyond two; but you know where I wanted to put them
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Old 29th September 2011, 09:44   #48
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Originally Posted by mxx View Post
The fuel quality is not low. Atleast what comes out after refining is not. If you are talking about adulteration, that is done after refining is done and company has already borne the cost of refining. If you are talking about octane, octane is not a measure of purity, but yes, agree that high octane is even pricier.
India generally buys high sulphur crude as it is cheaper to buy. Refining costs are higher but sulphur is a bye-product. Fuel quality at the refinery does not match equivalent western standards - something the refineries and the Govt hate to admit. Octane rating is abysmally poor.

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Most people dont use public transport either because they are lazy or because they feel that traveling in public transport is below their status.
People aspire to travel in reasonably clean vehicles & in relative comfort. If public transport facilities improve, many will travel in it and leave the car at home for general outing. Take a look at Singapore where the carrot and stick policy has worked to a very large extent.

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Originally Posted by man_and_machine View Post
Now another thing to note is the economic of buying the fuel, India does not trade on Oil futures unlike the US. I am not sure why we do not trade futures, but the reason I have heard is that we do not have enough money ??? (ridiculous is it not !).

The next factor is the Oil trading currency. Its the $ and we all know we are not insulated against the swing in it.

The next factor .. our companies are not part of the consortium from which we import. So the $ does not come back to us.

..on the Oil front out government over the years has not taken leadership to ensure that Indians can afford Oil. We are bare in the open to forces that we do not control, partner or even work with.

Remember how Iran had in the past months threatened to stop giving us Oil as we had unpaid bills? To top this we have a 100% net tax on Petrol !
The sad part is that our Govt is reactive and not proactive. Management by Crisis. It is difficult to take a 'Yes' decision whereas a 'No' is easy and non threatening for the decision maker.

To sum it, the citizen is taken for granted unless s/he protests!
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Old 29th September 2011, 10:46   #49
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Originally Posted by DicKy View Post
Looks like Sir has come from a highly developed west European country where everything is entitled to high amount of cost.
I know i mean offence and am sorry for that, but we are not telling to sell petrol at Riyadh prices.
The above mentioned things are nevertheless essential commodities in the modern life. Everything comes at a cost i agree and there is nothing like a free lunch but that doesn't mean daylight robbery. Anyone would agree that our petroleum prices are way more expensive and that too considering the quality of fuel we are supplied. Western European countries may have the highest petrol prices but still they get the highest quality too,more than even U.S.A.
Unlike us, low quality fuel at high prices. And the amount of taxes they charge on the fuel is enough for ensuring a good infra of roads and all, even then toll is being charged on any roads outside city limits which are in good condition,highways included.
Then you should protest about govt not doing enough public welfare with the taxes it collects on oil etc.

Don't blame the oil prices because of taxes and duties.
Perhaps you should read a little more about how Govt is financed. Gov't is not a magician pulling golden rabbits out of its hat. It needs to earn an income which it can spend on public goods/services (especially the ones that have negative economic value in short term).

Vishnu has already raised this in his post:
Direct tax is a joke in India.
Ppl feel proud in evading tax.

Indirect tax is also a kind of joke, where all business folks feel proud in evading duties and taxes.

So the only sure shot way of Govt's income is tax those items that public has to consume, and buy it from the govt. Like Oil.

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Originally Posted by chandras1 View Post
That IMHO is not the problem. The lack of a *reliable* public transportation system *is* the problem. This is the main reason why people use their own vehicle and therefore pricing of fuels is such a sensitive issue.

All this talk about saving forex for the country doesn't cut ice, when the only means I have to reach my office is my vehicle and obviously I need fuel for that! Increase in fuel prices will not show a direct correlation in bringing down the consumption.
Yes - the public transport but its not limited to that.
1. Even if I provide you with the most efficient transport - you will still choose to go via personal transport if you can afford it, and if it is speedy enough.

Public transport is a success in places where there is high traffic congestion.
That's when metros kick in.

2. If you believe the only means of reaching your office is by your personal Skoda Superb (just giving an example) - then please ask your office boy - how he commutes daily.

So public transport is already there, but not to your levels of comfort/luxury.

Last edited by alpha1 : 29th September 2011 at 10:52.
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Old 29th September 2011, 12:52   #50
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Default Re: Petroleum Pricing in India ? Debate

What if the subsidies were ended all together or reduced? Move over to the US system where every outlet competes against each other. Wouldnt this in effect lower prices? Each state could still keep their tax structure im guessing.
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Old 29th September 2011, 14:17   #51
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Default Re: Petroleum Pricing in India ? Debate

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Then you should protest about govt not doing enough public welfare with the taxes it collects on oil etc.

Don't blame the oil prices because of taxes and duties.
Perhaps you should read a little more about how Govt is financed. Gov't is not a magician pulling golden rabbits out of its hat. It needs to earn an income which it can spend on public goods/services (especially the ones that have negative economic value in short term).

luxury.
Govt also bends backwards in giving subsidy to industry. For example a big conglomerate wanted to open a paper mill in karnataka, the govt gave them bamboo at 5Rs/tonne .. yes you read it right 5 Rs/tonne.
Nokia when opened up shop in TN, the govt gave them full refund on VAT over each phone sold.

Where did this money come from ? Of course from you and me.
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Old 29th September 2011, 16:04   #52
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Originally Posted by vishnurp99 View Post
This is the view from an oil ministry IAS guy who i once met in a flight and in his view the state and central govts will have to keep the taxes high if the salaries of our babus have to be paid.
And have enough in the treasury for the politician-bureaucracy-businessmen clan to loot. If those in power developed infrastructure and made life simpler for the common man, people would not mind paying reasonable taxes. When taxes are solely to perpetuate the loot cycle, the common man is justified in being cynical. If the number of the 'Babu' tribe decreases, the quality of life of the common man improves.

The common man is rarely organised. It is always the vocal minority who push through with their agenda, leaving the common man to foot the bill.
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Old 29th September 2011, 16:26   #53
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Originally Posted by CaliAtenza View Post
What if the subsidies were ended all together or reduced? Move over to the US system where every outlet competes against each other. Wouldnt this in effect lower prices? Each state could still keep their tax structure im guessing.
Wasn't that attempted by allowing Reliance/Essar/Shell to open petrol outlets ? Look at the prices they are charging - higher than PSU's. So unless taxes are reduced prices are not going to fall.
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Old 29th September 2011, 16:49   #54
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Originally Posted by ethanhunt123 View Post
Wasn't that attempted by allowing Reliance/Essar/Shell to open petrol outlets ? Look at the prices they are charging - higher than PSU's. So unless taxes are reduced prices are not going to fall.
After the petrol prices were deregularized Shell is costing lesser than the PSU pumps.

Again I wonder ONGC has two oil exploration decks and after Bombay High they have not hit upon even one reserve. And Reliance with zero exploration equipment manages to find and own KG basin. The babu-giri has ruined the PSU to the point of destruction.
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Old 29th September 2011, 16:51   #55
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Where in India is shell cheaper than HP/BP/IOCL ? In Bangalore it is atleast 50 paisa more expensive.
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Old 29th September 2011, 18:38   #56
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Default Re: Petroleum Pricing in India ? Debate

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Originally Posted by ethanhunt123 View Post
Where in India is shell cheaper than HP/BP/IOCL ? In Bangalore it is atleast 50 paisa more expensive.
IIRC it used to be cheaper by a few paise about a month back. Right now it is higher than PSU.
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Old 29th September 2011, 22:11   #57
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ONGC has assets internationally for instance in the south China sea etc, where they collaborate with other player for exploration and Production. However the production is not directly exported to India. Reliance in India is not into Oil, they are into Methane in the KG basin which is for Gas production little help to us Petrol heads.

Unless there is a clear Oil strategy from the Indian Govt. its difficult for us not be at the mercy of the OPEC.

Look at China, they have politically and strategically aligned with a lot of Oil rich nations. We need a strong govt which puts the interest of its citizens first!
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Old 30th September 2011, 02:40   #58
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i had said this in another thread and i will say the same here.

In my opinion, and this is just my personal opinion (no implications here), if we rationally look at the issue of petrol prices, we all know it will rise, its inevitable, but how we take it is what matters. The common assumption people tend to make is that their economic position will be the same in future, which is an assumption one cannot afford to make. Lets just take the fact that by gods grace (and your own efforts obviously) you would be economically stronger in future, even if you stagnate, then economic powers will push you forward.

We are Lucky we are in one of the fastest developing economies. In the next few years our purchasing power will rise as well. This Saving Grace is not there for people in Developed/Underdeveloped countries. To understand my point, think of how you would feel spending Rs.1,500 today and then compare the same to..say..10 or even 5 years ago. You will notice a difference.

The rate at which we have grown from 2001 to 2011 is astounding. Corruption has always been there, but the fact that its making headlines says something. We are growing more intolerant as we grow into a stronger country.

Petrol prices will go up, it will not stop people from purchasing vehicles, some will go for diesel, but remember that the subsidy is not going to be here for long. In a few years, Diesel will be as expensive or even more expensive than petrol.

To look at it from a positive point of view, which i will agree is very hard but cannot be ignored, Petrol is not the future, we are just sticking with it because nothing else is AS CHEAP, everything else which is not petroleum based costs a bomb (Hydrogen, Solar). We are slowly crawling towards an era of change, where technology both in our country as well as the world will advance, and these new fuels will become cheaper.

The reason i am saying this is because i got annoyed when a few friends of mine tried to explain to me that the Government is plotting against its people. Now, even when they had no logical theories to prove this, they stand convinced. Which in my opinion is unwise. I tried to solve this, but trust me, nobody listens to a lawyer outside the courtroom. Its downright funny as well as annoying, even though i am still a law student.

We must read between the lines, the Opposition will want you to believe that the Govt has been robbing its people. I would love to be present at one of those press conferences and ask them straight away "All right, lets say we vote you into the Govt tomorrow, will you reduce the prices the next day?"

I am no advocate of any side, not do i claim that this present Govt has done wonders for this country. I say that the people, who take this country forward cannot afford to get polarized by these forces. Vested interests will always make it look as if the world is going to end, remember their motive when you listen to them. Had they done enough to earn the trust of the people, they would have been in Government.
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Old 30th September 2011, 11:12   #59
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I am at loss to explain why all the people are against uniform petroleum pricing in India I am not suggesting that states should loose revenue, the sales tax percentage will remain the same, more or less states charge from 18 to 30% sales on petrol. The mean average outflow calculated will arrive at around 25% from companies point of view. It does not mean states which are charging 30% will get 25% tax, they will continue to get 30% whereas the oil company will adjust the basic rate. The oil companies does not loose a single NP nor states their percentage of tax. But the price of Petrol will be uniform across India, one nation one product and one price. This is how well managed companies function, it has been undertaken by Levers almost 2 decades ago, i hope some CA explains this phenomenon in a better and logical manner.

The same logic can be carried forward for vehicles too, one brand, one price across the nation. The consumer will not be taken for a ride if dealership is monopolised by one family or cartel. I am sure it will be a win win situation for the company and consumer alike.
@ukderebail, I dont think anyone is against uniform pricing. As @aby indicates, petroleum and alcohol are not under GST, which is the problem. I too agree with @aby with the point that it is not responsibility of oil companies to rationalize the pricing.
Govts are charging abnormal tax rates in places like Karnataka in the names of road and infrastructure improvement! I'm not commenting on these, since the situation is known worldwide. Because of policies of govts who has only one aim of filling coffers (and empty it in their own well known methods), should companies suffer?

Why cant Govt rationalise the tax rates instead?

Last edited by samm : 30th September 2011 at 11:16. Reason: Added one more statement at the end.
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Old 30th September 2011, 11:16   #60
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@ukderebail, I dont think anyone is against uniform pricing. As @aby indicates, petroleum and alcohol are not under GST, which is the problem. I too agree with @aby with the point that it is not responsibility of oil companies to rationalize the pricing.
As a cartel the oil companies can bulldoze and implement the uniform pricing keeping the current level of taxation as the base. Whichever state govt objects just stop petrol and diesel supplies for two days they will come to their knee and agree to uniform pricing policy. Eventually equate the taxation in the long run quoting price rationalisation At least we as citizens of India should be treated uniformly whether we reside in Bangalore or Delhi Similarly one uniform life time tax across India is essential, if at all refunds has to be carried out let it be one inter-state level ( credit and debit their account ) Max. migration or change of address fees of Rs 200 to 500 should be charged depending on category of vehicle.

Last edited by ukderebail : 30th September 2011 at 11:20. Reason: add info
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